Incident: The company announced its annual results and achieved revenue of US$1.37 billion in 23, a decrease of 30.9%.
Net profit - US$37 million, a decrease of 126.7%. Net profit margin -2.7%, down 9.7pct. Adjusted net profit - US$37 million, a decrease of 124.3%.
Among them, 23H2 achieved revenue of US$630 million, a decrease of 36.1%. Net profit - $0.9 billion, a decrease of 213.7%. Net profit margin -13.6%, down 21.3pct.
The gross profit for 23 years was US$390 million, and the consolidated gross margin was 28.1%, a decrease of 2.3 pct, mainly due to preparation for inventory impairment. Second, the cost for the 23-year period was US$410 million, and the cost rate for the period was 30%, an increase of 11.4 pcts over the same period.
Among them, sales/management/R&D expenses were 17.7%/7.0%/5.1%, respectively, an increase of 7.0/2.5/1.8pct.
The main reasons for the decline in net profit are: ① macroeconomic uncertainty and unfavorable weather in major regions; ② major customers adopt more conservative inventory policies.
Under external pressure, the North American market still dominates the core. By product, revenue from the Outdoor Power Equipment (OPE) division in '23 was US$81 million, down 33.7%; revenue from the power tools division was US$550 million, down 27.3%; revenue from the original brand manufacturing (OBM) business was US$1.01 billion, a decrease of 27.2%, accounting for 73.2% of total revenue in '23, an increase of 3.7 pct. By region, North America's revenue in '23 was 940 million US dollars, down 37.3%; European revenue was 280 million US dollars, down 11.0%; China's revenue was 100 million US dollars, up 1.1%; and revenue from the rest of the world decreased by 29.0% from 50 million US dollars.
EGO products continue to grow, and e-commerce platforms expand channels. In terms of sales brand categories, we have continued to develop and promote flagship EGO brand products for 23 years. By the end of '23, global sales of the EGO brand lithium battery platform had increased to approximately 14 million units. Starting from 23Q3, EGO brand lithium battery products will be supplied to JohnDeere dealers in the US and Canada, further expanding the sales scope of EGO lithium battery OPE products. Through cooperation with e-commerce platforms to further strengthen online sales channels, EGO ranked first among the DC OPE brands in a mainstream global e-commerce platform, achieving double-digit growth in 23 years.
Profit forecast and rating: Considering the low overall market demand, we lowered the company's net profit for 24-25 from US$150 million and US$180 million to US$0.7 and 110 million. The current closing price corresponds to PE of 24 and 25, which is 18 and 12 times, respectively. As a leading lawnmower company, the company gave the company a 20-22 times PE valuation in 2024, corresponding to a reasonable value range of $2.80-3.08, corresponding to HK$21.91-24.10 (exchange rate: 1 US dollar = HK$7.8258), giving it a “superior to market” rating.
Risk warning: risk of loss of major customers, risk of global trade risk, risk of large fluctuations in raw materials and foreign exchange, risk of declining real estate cycle, risk of cross-market valuation.