Matters:
The company released its 2023 annual report. The company achieved revenue of 4.71 billion yuan, +14.4% year on year; realized net profit of 450 million yuan, +15.2% year on year; looking at the split quarter, the company's 23Q4 revenue was 1.39 billion yuan, -1.8% year on year; and net profit to mother was 130 million yuan, -11.1% year over year. In '23, the company paid a cash dividend of $12 for every 10 shares.
Commentary:
23Q4 revenue volume declined slightly year-on-year, and small household appliances, pots and electric products performed well. The company achieved revenue of 1.39 billion yuan in a single quarter in 23Q4, down 1.8% year on year. We judge that it was mainly affected by the high base effect. Revenue for the full year of '23 increased 14.4% year-on-year. Among them, revenue from household appliances, cookware, and electric products increased 22.8%, 19.8%, and 18.2% respectively, showing impressive results. Looking at the split channels, the company's online channels increased 9.9% year on year and offline channel revenue increased sharply by 41.2% year on year in '23. Mainly because the company opened offline O2O brand stores in '23, and nurturing core store owners and channel core dealers achieved positive results. By market area, the overseas market achieved revenue of 370 million in '23, a sharp increase of 105.7% over the previous year, and major breakthroughs were made in the overseas business of independent brands. We expect that the overseas market will contribute more large-scale growth to the company in the future.
23Q4 gross margin declined year on year, and the cost ratio for the period narrowed year on year. The company achieved net profit of 130 million yuan in 23Q4, -11.1% year-on-year. The company's 23Q4 gross margin was 31.8%, down 5.9pct from the previous year. We expect the product structure to sink mainly due to major regulatory adjustments on the 23Q4 platform. In terms of cost ratios, the company's 23Q4 sales/management/R&D/finance expense ratios were -3.2/-1.1/-0.4/-0.2 pct year on year, respectively. The total cost ratio for the period decreased by 4.8 pct year on year, and cost efficiency improved during the period. Under the combined influence, the company achieved a net profit margin of 9.3% in 23Q4, a year-on-year ratio of -1 pct. The company focuses on core demand groups with cost-effective products, and has continued to expand the high-customer unit price category in recent years. We expect the company's profitability to gradually increase in the future.
The digital system transforms the core, and digital manufacturing enhances operational capabilities. In '23, the company focused on the digital core, insisted on three-wheel drive of processes, data, and systems, upgraded, replaced and transformed a total of 11 systems, including PLM and ERP, and consolidated the company's digital foundation. The company's manufacturing system combines product technology and lean manufacturing to improve the overall level of lean improvement, adhere to automation investment, and comprehensively and continuously improve manufacturing capabilities. In addition, the company has built 5 intelligent manufacturing bases, using digital technology as the foundation to fully empower various business fields such as business operations and intelligent manufacturing.
Investment advice: The company is a leader in creative small household appliances in China, accurately grasps consumer needs, responds quickly, and develops and designs new products. The company's revenue grew steadily, but short-term profitability was still briefly pressured by new channels. We adjusted the company's net profit forecast for 24/25 to 51/570 million yuan (previous value: 53/590 million yuan), the net profit forecast for the additional 26 years to 620 million yuan, and the corresponding PE for 24-26 was 18/16/15 times, respectively. Using the DCF valuation method, the adjusted target price was 66 yuan to maintain the “recommended” rating.
Risk warning: Competition in the industry intensifies, demand for terminals falls short of expectations, and rising raw material prices.