Core views

Stone Technology released its 2023 annual report, and its revenue performance continues to be impressive. Domestic and foreign sales and shipping trends were good during the Q4 peak season. Aowei Cloud Network showed that the company's Black 5 and Double Eleven promotions all achieved high double-digit growth. Over the long term, with the iteration and upgrading of sweeper technology, user needs can be better met, and the trend of laziness is expected to drive a continuous increase in product penetration. In 2023, the company's domestic and foreign sales share increased markedly, and its core competitiveness was fully demonstrated.

occurrences

Stone Technology released its 2023 annual report.

In 2023, the company's total revenue was 8.664 billion yuan, up 30.55% year on year, and realized net profit to mother of 2,051 billion yuan, an increase of 73.32% year on year. After deducting non-net profit of 1,826 billion yuan, up 52.46% year on year, operating cash flow was 2.86 billion yuan, up 95.09% year on year.

Looking at a single quarter, 23Q4 achieved revenue of 2,965 billion yuan, a year-on-year increase of 32.60%; net profit to mother of 691 million yuan, an increase of 110.33%; deducted non-net profit of 572 million yuan, an increase of 68.60% year-on-year.

The company plans to distribute a discovery dividend of 615 million yuan, accounting for 29.96% of net profit attributable to mother.

Black 5 and Double Eleven sales were good. The peak season continued to perform well in the fourth quarter. In 2023, the company achieved rapid growth against the backdrop of the overall weakness of the sweeper industry and steady overseas demand. In terms of volume and price breakdown, in 2023, stone sweepers sold 2.6 million units, up 15.54% year on year. The average sales price was 3116 yuan, up 10.27% year on year.

At the domestic sales level, the company's new 2023 P10 and G20 series performed well in the corresponding price segment, and the iterative P10 Pro successfully relayed in the second half of the year, helping the company extend good sales performance during the peak season. According to data from Aowei Cloud Network, online retail sales of Shitou M10-M12 increased by 80%, 14%, and 14% respectively, and Double Eleven GMV achieved an increase of more than 30%.

In terms of export sales, Stone performed well in major overseas promotions such as Black Friday and Christmas. Specifically, Europe is expected to achieve high double-digit growth under a lower base. Affected by the Russian-Ukrainian war and inflation during the same period, the European market was impacted. Over the past 23 years, the combined consumption of new overseas consumers has recovered, and shipment data is rising rapidly. North America's share continues to rise, and Black Five is expected to grow by around 30%.

Operation boosted by superimposing growth without growth, and achieved high growth on the profit side

23Q4's net profit to mother increased 110.33% year over year, mainly due to factors such as increased revenue in North America with high gross margins, product structure upgrades and increased overseas share of S8 Ultra, and appreciation of the US dollar against the RMB. Effective cost-side compression is mainly driven by pre-launch and dilution of scale effects. At the same time, the company received tax rebates and better financial management benefits from key software companies, increasing current profits.

In Q4, the company's gross margin in a single quarter was 56.65%, +5.94pct year-on-year. The sales expense ratio was 23.53%, -0.18pct; the management expense ratio was 1.34%, -0.48pct; the R&D expense ratio was 5.77%, -0.67pct; and the financial expense ratio was -0.94%, -0.37pct year on year. Net profit margin was 23.30%, +8.61 pct.

2024 New products are highly competitive, and we are optimistic about Stone's performance throughout the year.

On February 18, the company launched a new product in the P10S series, adding dual robotic arm functions to the cost-effective price range. According to pre-sale data from the JD and Tmall platforms, the P10S series achieved a significant increase compared to last year's P10 pre-sale price. On March 29, the company launched the G20 iteration model G20S. The functionality of the flagship was further upgraded, and a new V20 series was launched. The fuselage is thinner and can cover low areas in the home that are difficult to clean. Relying on the good reputation accumulated by the G series and P series in the past, and adding new iterative upgrades of superimposed functions, the company is expected to continue its impressive performance in 2024.

I am optimistic that the demand of lazy people will drive the long-term growth of the industry. Stone's competitiveness has bucked the trend and showed that the sweeper industry was affected by the previous epidemic and weak consumption recovery in the short term, and growth momentum still needs to be restored. In the long run, we believe that sweepers focus on the needs of lazy people, and have the characteristics of solving common but unmet consumer needs. Sweepers are expected to replicate the logic of “just need to clean+free your hands” of past washing machines, and achieve a shift from “optional” to “mandatory”. At the same time, sweeper products have strong technological attributes. Referring to past data, consumers place more importance on experience than price. Leading high-quality companies are expected to accumulate brand potential and take on the future growth dividends of the industry.

In a weak market environment, Stone handed over beautiful answers, demonstrating its core competitive strength. The domestic sales side continued to increase its share in the face of strong competition. Export sales were driven by the release of popular models, and the products quickly came out of the North American market. Currently, the company's share in the US and Asia has exceeded 20%, second only to iRobot in the North American market. The cumulative sales volume is expected to increase the company's overall sound and help achieve breakthroughs in mainstream offline channels.

Investment advice: We believe that the sweeper industry addresses the needs of laid-back consumers. The penetration rate will continue to increase after the economy recovers, and we are optimistic about the future growth space driven by the company's strong technological strength. The company's revenue for 2024-26 is expected to be 10.7, 129, and 15.4 billion yuan, respectively, with growth rates of 23.90%, 20.65%, and 18.86%, respectively, and net profit to mother of 24.3, 29.7, and 3.56 billion yuan, with growth rates of 18.51%, 22.22%, and 19.80%. Corresponding PE is 18.53X, 15.16X, and 12.65X respectively, maintaining the “buy” rating.

Risk warning: 1. The macroeconomic growth rate falls short of expectations. Clean appliances are durable consumer goods and are closely related to residents' income expectations. If macroeconomic growth slows down, or it has a big impact on the company's product sales; 2. Raw material prices fall short of expectations: the company's raw material costs account for a large share of operating costs, and if bulk prices rise again, the company's profitability will weaken; 3. Overseas market risks: Uncertainty in the overseas environment has increased in recent years, and the company's export sales account is relatively high. If external demand falls, the performance will be impacted accordingly; 4. Market competition intensifies: In a weak market environment, competition in the industry is more intense, and there is a risk that the company will lose share and competition will drag down profits at low prices.