Matters:
The company released its 2023 annual report, achieving operating income of 9.61 billion yuan, -5.5%; achieving net profit of 390 million yuan, -26.5% year over year; of these, 23Q4 achieved operating income of 2.83 billion yuan, -12.9% year-on-year; and realized net profit of 0.26 million yuan, or +0.9% year over year.
Commentary:
Domestic sales demand for small household appliances was weak, putting pressure on the company's revenue scale in '23. The company's overall revenue declined by 5.5% in '23, with a 17% decline in China and a 69% increase overseas, mainly due to weak domestic demand for small household appliances, which affected the company's online channel revenue falling 15% year on year. According to data from Aowei Cloud Network, the overall scale of 23 small kitchen appliances fell 9.6% year on year, with an online decline of 10.7%; the company adapted to the K-type differentiation trend in domestic small household appliance demand and focused on product innovation in segmented categories. Although short-term domestic sales were under pressure, domestic sales offline recovered significantly in 23 years and increased 9.5% year over year. Followed by the recovery in domestic sales demand and the promotion of new online products, we expect the inflection point of the company's operations can be expected.
23Q4 gross margin declined year on year, and the cost ratio increased year on year during the period. In 23Q4, net profit to mother was 0.26 million yuan, +0.9% year-on-year. Net profit to mother fell 26.5% year-on-year for the full year of '23, and the profit side was temporarily under pressure. The 23Q4 company achieved a gross profit margin of 27%, a year-on-year ratio of 2.8 pct. We expect the share of low-margin export business to increase, affecting the decline in profitability, increasing the share of export sales revenue to 23% in '23, an increase of 10 pct compared to '22. Currently, domestic sales demand is showing a weak recovery trend. Following the recovery in domestic demand and the expansion of the company's categories, it is expected that profitability will gradually recover. 23Q4's sales/management/R&D/finance expense ratios were +1.2/+0.6/+0.3/-0.2pct, respectively, and the total cost rate for the period was +2pct year over year; under comprehensive influence, 23Q4 achieved a net interest rate of 0.9% to mother, +0.1pct year on year; we expect that with the recovery of domestic demand in the future, the company's profitability will continue to recover, and the net interest rate can be expected to improve in subsequent quarters.
The business base was put under pressure for a short time, and attention was paid to the profit elasticity of leading small household appliances as demand improved. The company is a leading domestic small household appliance. It always insists on innovation to lead product transformation and has insight into consumer demand pain points. During the reporting period, the company focused on Space Series 2.0 products, laid out a high-end product line for small kitchen appliances, and launched many new products such as zero-coated non-stick rice cookers; in the cleaning appliance sector, the company innovated crawler roller brushing technology to wash floors with mainstream products such as floor washers with integrated washing and drying. Along with the increase in sales volume after the introduction of new products, we expect the company's profit to improve at an inflection point.
Investment advice: Joyang is a leader in the domestic small household appliance category, and has sufficient long-term growth momentum; however, the overall demand for domestic sales terminals is weak and short-term operations are under pressure; therefore, we adjusted the company's net profit forecast for 24/25 to 46/52 million yuan (original value of 6.6/750 million yuan), and the net profit forecast for the additional 26 years is 550 million yuan, and the corresponding PE for 24-26 is 18/16/14 times, respectively. However, short-term demand does not affect the company's long-term value. Under the advantage of product innovation, the company has sufficient momentum for long-term growth. Refer to the DCF valuation, adjust the company's target price to 14 yuan, and maintain the “recommended” rating.
Risk warning: Competition in the industry has intensified, raw material prices have fluctuated greatly, and demand for terminals is sluggish.