Core views:

23Q4 achieved rapid growth in revenue and profit. The company disclosed its 2023 annual report, with annual revenue of 1.22 billion yuan (YoY -5.3%), net profit to mother of 170 million yuan (YoY +8.4%), gross profit margin 35.8% (YoY+5.9pct), net profit margin 14.4% (YoY+1.8pct), and sales/management/finance/R&D expense ratios of +1.3pct/+0.2pct/-1.2pct/+1.4pct, respectively. 2023Q4 revenue of 380 million yuan (YoY +51.1%), net profit of 5011.8 trillion yuan (YoY +86.9%), gross profit margin 38.1% (YoY 13.6pct), net profit margin 13.2% (YoY+2.5pct), sales/management/finance/R&D expense ratios were -9.2 pct/-6.1 pct/-7.3pct/+1.5pct, respectively. The 2023Q4 revenue growth rate accelerated by 49 pct month-on-month, and the improvement was significant. We believe that this is mainly due to the continuous improvement on the company's revenue side after the overseas inventory removal was completed. In addition, the company announced the 2023 profit distribution plan, which distributes a cash dividend of 830 yuan for every 10 shares to all shareholders, and plans to distribute 150 million yuan in cash. The dividend ratio is 86%. As of the 2024/04/17 closing price, the dividend rate is about 3.8%.

Sales of the main product, vacuum cleaner and air compressor 23H2, improved significantly. By product, the 2023H2 vacuum cleaner's revenue was 380 million yuan (YoY +9.9%), the growth rate improved by 16 pcts, the air compressor revenue was 290 million yuan (YoY +56.0%), the growth rate improved by 101 pcts month-on-month, and revenue from accessories and other equipment was 389.17 million yuan (YoY +191.6%). By sales model, the full year of 2023 brand licensing revenue is 520 million yuan (YoY -16.1%), ODM revenue is 620 million yuan (YoY +9.4%), OBM revenue is 406.15 million yuan (YoY -28.2%), and OEM revenue is 347.22 million yuan (YoY -13.3%).

Profit forecasting and investment advice. The company mainly exports air compressors and vacuum cleaners. After overseas inventory removal ended in 2023, overseas demand improved significantly. In 2023, the company's export business accounted for 99%, benefiting from export recovery. Based on this, we expect the year-on-year growth rate of the company's net profit to mother in 2024-26 to be 23.6%, 19.9%, and 18.8%, respectively. Referring to comparable company valuations, we will give 20xPE in 2024, corresponding to a reasonable value of 23.67 yuan/share, covering the first time, and giving it an “increase in holdings” rating.

Risk warning. Overseas demand is weakening, raw material prices are rising, exchange rates fluctuate greatly, and the US is imposing tariffs.