Incidents:
The company released its 2023 annual report, achieving operating income of 4.334 billion yuan, a year-on-year increase of 3.52%, and net profit attributable to shareholders of listed companies of 425 million yuan, a year-on-year decrease of 7.25%.
Comment:
Results continued to pick up during 2023, and Q4 revenue and profit increased year-on-year. The company achieved revenue of 8.1/10.7/12.1/1.24 billion yuan respectively in 2023Q1-Q4, -29.0%/-11.6%/+22.1%/+47.3%, and realized net profit to mother of 0.45/1.14/1.31/135 million yuan, or -52.7%/-13.2%/+0.7%/+33.7% YoY.
Kitchen and bathroom products and water purification products have both grown. In the 2023 revenue, kitchen and bathroom products/water purification products/non-household products contributed 28.7/6.2/210 million yuan, an increase of 4%/6%/7% year-on-year, accounting for 66%/14%/5% of revenue. Other household products and other business revenue declined slightly.
There was a slight increase in gross margin. The company achieved a gross profit margin of 25.97% in 2023, an increase of 1.69pct over the previous year; among them, kitchen and bathroom products/water purification products achieved a gross profit margin of 26.14%/25.98%, an increase of 1.32/2.57pct; in a regional perspective, domestic/overseas gross profit margin was 28.09%/19.39%, up 2.01/0.98 pct year on year.
Maintain a high level of R&D investment. The company insists on innovation leadership and transformation empowerment, and insists on a high level of R&D investment. The R&D cost in 2023 is 240 million yuan, and the R&D cost rate is 5.5%. By the end of 2023, the company had 2,197 valid domestic and foreign authorized patents, including 259 invention patents.
Thailand's Jianlin Phase II and the Zhangzhou Hardware Leading Project are expected to contribute to performance in 2024. Thailand's Jianlin Phase II is expected to gradually implement mass production in 2024, with an annual production capacity of about 550 million yuan. The Zhangzhou Jianlin Hardware Leading Production Expansion Project has a total investment of 160 million yuan, with an annual production capacity of 4 million sets. It is expected to contribute revenue in 2024, laying a solid foundation for the company to enter the ranks of high-end precision manufacturing.
It is expected to benefit from improved demand brought about by US interest rate cuts. According to Wall Street news, the Federal Reserve may cut interest rates three times in 2024. The company accounts for nearly 80% of overseas revenue. Among them, the US is the main overseas market, which is expected to fully benefit from the improvement in demand in overseas real estate chains brought about by US interest rate cuts.
Maintain an “Overweight” rating. Based on fine-tuning profit forecasts from the annual report data, the estimated revenue for 2024 to 2026 will be 52/60/6.9 billion yuan, up 19%/16%/16% year on year, and net profit to mother will be 5.1/6.1/70 billion yuan, up 20%/15% year on year, corresponding PE of 11/9/8 times.
Risk warning: Overseas business risk, risk of exchange rate/raw material price fluctuations, performance falling short of expectations