Description of the event
The company disclosed its annual report: In 2023, the company achieved operating income of 4.712 billion yuan, a year-on-year increase of 14.43%, achieved net profit of 445 million yuan, an increase of 15.24% over the previous year, and achieved non-net profit deducted from mother of 382 million yuan, an increase of 5.59% over the previous year. The company achieved operating income of 1,394 billion yuan in the fourth quarter of 2023, a year-on-year decrease of 1.79%, realized net profit of 130 million yuan, a year-on-year decrease of 11.12%, and realized deducted non-net profit of 113 million yuan, a year-on-year decrease of 8.29%. The company plans to distribute a cash dividend of 12 yuan (tax included) to all shareholders for every 10 shares, with a dividend rate of 41.86%.
Incident comments
High growth in overseas business, boosted by offline efforts, jointly driving the company's annual revenue to achieve good growth. The company achieved a 14.43% year-on-year increase in revenue in 2023. Looking at the subregions, the company's domestic sales increased 10.27% year on year and foreign sales increased sharply by 105.66% year on year in 2023. The company achieved breakthroughs in overseas business, mainly due to the company expanding its domestic brand power, product power and manufacturing advantages to overseas markets. The company achieved good performance in exporting its own brands overseas, ODM and cross-border e-commerce businesses; by channel dimension, the company's online sales increased 9.88% year on year in 2023, and offline sales increased 41.18 year on year %, mainly due to the company opening offline O2O brand specialty stores and launching the “Golden Seed Program” to train sinking core store owners and channel core dealers. By category, in 2023, the company's electric sales of small kitchen appliances increased 18.24% year on year, electric heating products decreased 2.83% year on year, pot category increased 19.84% year on year, pot category increased 12.85% year on year, Western-style appliances decreased 16.99% year on year; small household appliances increased 22.8% year on year, and other small household appliances increased 67.54% year on year. Taken together, the expansion performance of essential categories and new categories was relatively good. On a quarterly basis, the company's 2023Q4 revenue fell 1.79% year on year, or mainly due to the fact that the external demand environment is still more rational.
The company's gross margin increased slightly, and the increase in market promotion fees and consulting service expenses led to a decline in the company's operating profit margin.
The company's gross margin in 2023 increased 0.17 percentage points year on year to 36.61%. Among them, at the regional level, the gross margin of the company's domestic business increased 0.53 percentage points year on year, and the gross margin of foreign business fell 2.53 percentage points year on year, or mainly due to relatively rapid growth in private brand distribution; at the sub-channel level, the gross margin of the company's online channel increased 1.07 percentage points year on year, and the gross margin of offline channel sales decreased 2.11 percentage points year on year. At the same time, the company's sales expense ratio increased 1.04 percentage points year on year, mainly due to the company's 2023 market promotion expenses increasing by about 104 million yuan; the company's 2023 management fee ratio increased 0.28 percentage points year on year, mainly due to the company's 2023 consulting service fee increase of 17.8 million yuan, the R&D expenses rate decreased 0.31 percentage points year on year, and the financial expenses ratio increased 0.21 percentage points year on year, and the company's annual operating profit margin fell 1.24 percentage points year on year. Among them, the company's gross margin for the fourth quarter fell 5.86 percentage points year on year, sales expenses ratio decreased 3.2 percentage points year on year, management expenses fell 1.08 percentage points year on year, and operating expenses fell marginally. Combined, the company's operating profit margin for the fourth quarter fell 1.09 percentage points year on year.
Investment advice: The company has a high level of brand awareness and has formed an efficient mechanism to continuously launch innovative products, which can quickly capture changes in consumer demand, thereby guaranteeing the outstanding efficiency and success probability of the company's new products. It is expected to open up growth opportunities and continue to increase market share in the high-potential creative small household appliance market. At the same time, the company optimizes production processes and management efficiency through digitalization, which is expected to bring about a recovery in the company's operating efficiency. We expect the company's net profit to be 508, 5.68, and 632 million yuan in 2024-2026, corresponding to PE of 16.43, 14.68, and 13.20 times, respectively, maintaining a “buy” rating.
Risk warning
1. The economy is recovering, and the decline in consumer spending intentions may lead to a decline in income growth; 2. Increased market competition brings the risk of reduced profit efficiency.