Profit for the whole year was close to the forecast limit, and the quality of operations improved steadily. In 2023, the company achieved revenue of 85.60 billion/+15.5%, net profit of 2.84 billion yuan/ +97.7%, net profit of non-return to mother of 2.36 billion/+160.1%.
Among them, Q4 revenue was 20.7 billion/+21.1%, net profit attributable to mother was 410 million/ +12.7%, and net profit of non-return to mother was 290 million/ +124.9%. The company plans to pay a cash dividend of 10.13 yuan for every 10 shares, with a cash dividend ratio of 49%. The company's profit in 2023 was close to the upper limit of the previous performance forecast, achieving nearly double growth; Q4 was affected by large non-recurring profit and loss due to the 2022 Q4 acquisition of Sandian, and the profit base to mother was high. After deducting non-profit, Q4's profitability still increased significantly.
The air conditioning business grew steadily, and the growth rate of ice washing increased markedly in the second half of the year. 1) The company's HVAC revenue increased 12.0% to 38.65 billion in 2023, with H1/H2 +11.7%/+12.5% respectively. Among them, Hisense Hitachi's revenue increased 10.1% to 22.17 billion, and net interest rate increased 19.3% to 3.24 billion yuan, which contributed 1.60 billion yuan to mother's net profit based on the company's 49.2% equity. Air conditioning revenue outside of Hisense Hitachi is expected to increase by about 15% to 16.5 billion. 2) Revenue from the cold washing business increased by 22.9% to 26.07 billion in 2023, with H1/H2 +11.1%/+34.4% respectively. Since the second half of the year, ice washing exports have recovered rapidly, and domestic sales are expected to maintain steady growth.
Three electronic vouchers have maintained rapid growth, and there is still an adjustment period in the short term. Sanden achieved revenue of 9.05 billion in 2023, which is expected to drop slightly year-on-year. However, Sanden continues to receive orders from customers in Europe, Japan, and China, and the total number of orders signed increased by 43% year on year. It is expected that as orders are gradually implemented, the quality of Sandian's business is expected to be optimized at an accelerated pace.
Overseas revenue rebounded steadily in the second half of the year. The company's domestic sales revenue in 2023 increased 15.0% to 49.04 billion, H1/H2 +18.5%/+11.8% respectively; overseas revenue increased 12.3% to 27.92 billion, and H1/H2 respectively -0.6%/+29.7%. The company set up a new joint venture in ASEAN to expand brand building. Revenue in the ASEAN region increased by more than 20%, with its own brand growing by more than 70%. The new cooperation model is expected to drive better growth in overseas revenue.
White power's profitability has improved significantly. The company's gross margin in 2023 was +1.4pct to 22.1% year-on-year, and the Q4 gross margin was +0.6pct to 22.0%. It is expected to be mainly due to reduced raw material costs, improved product structure and supply chain optimization. Q4 The company's expense ratio investment has increased. The main reason is that the company accrues long-term incentives, etc., and the sales/development/management/finance expenses ratio is +1.6/+0.3/+0.8/+1.0pct to 11.3%/4.2%/3.5%/0.5%, respectively. In 2023, the operating profit margin of air conditioners other than Hisense Hitachi increased by 4.3 pct to 3.7%, the net interest rate of the ice washing business increased by 2.4 pct to 3.7%, and the overall net profit margin to mother reached 3.3% /+1.4 pct.
Risk warning: Baidian's profitability has improved less than expected; Sandian integration and loss correction have fallen short of expectations; industry competition has intensified; exchange rates have fluctuated greatly; raw material prices have risen sharply.
Investment advice: Adjust profit forecasts to maintain a “buy” rating.
Considering the drastic improvement in the company's white power business profit and adjusting the profit forecast, the company's net profit for 2024-2026 is estimated to be 32.6/36.5/4.03 billion yuan (previous value was 31.8/36.0/- 100 million), +15%/+12%/+11% compared to the same period, corresponding to PE = 13/12/11x, maintaining the “buy” rating.