1Q24 profit is in line with our expectations
The company announced 1Q24 results: 1Q24 achieved revenue of 2,065 billion yuan, +9.15% year over year; net profit to mother 130 million yuan, +7.06% year over year; net profit after deducting non-return to mother of 125 million yuan, +7.23% year on year.
The company's performance was in line with our expectations.
Domestic sales ended decline: 1) Affected by changes in the small household appliance industry's sales “manpower market”, the company's domestic sales continued to decline for three years from 2021 to 2023. 1Q24 The company's revenue was positive year on year, mainly due to the increase in domestic sales of small kitchen appliances. According to AVC data, the overall demand for 1Q24's dominant categories, such as soy milk machines and rice cookers, is improving. Furthermore, the company achieved a slight increase in market share through measures such as product structure optimization. 2) According to AVC data, online sales of small kitchen appliances in January-March 2024 were +1%/-5%/+2% year-on-year, respectively. After the industry experienced inventory removal in 2023, the industry showed signs of marginal demand recovery in March of this year. From January to March 2024, Joyang's online sales were +5%/-8%/+10%, respectively, and the growth rate was better than the industry.
Cost ROI pressure still exists: 1) The small home appliance industry is facing overall ROI pressure due to channel changes. 1Q24 The company's sales expenses ratio increased. 2) The gross margin/net profit margin of the 1Q24 company was -0.9pp/ -0.1ppt to 26.9%/6.3%, respectively, and the sales/management/R&D expenses ratio was +0.7pp/ +0.2pp/ -0.2ppt to 13.2%/4.3%/4.2%, respectively. Higher raw material prices, fluctuations in foreign exchange, and increased investment costs had an impact on profit margins, but the company maintained a basic stability in net interest rates by reducing costs and increasing efficiency. Furthermore, the increase in tax rebates in the first quarter also had a positive impact on profit margins. 3) The company's inventory in 1Q24 was -22% year-on-year, which is at a historically low level.
Household appliance exports continued to grow: 1) Household appliance export boom, data from the General Administration of Customs, 1Q24 domestic household appliance export volume/value (in US dollars) was +24%/+12% year over year, compared to the high of +8%/-2% in the same period in '21, respectively. The export performance of the small kitchen appliances category, which had previously declined significantly, has also recovered. Exports of 2M24 electric cookers, toasters, coffee machines, etc. all achieved a year-on-year increase of more than 30%. 2) Benefiting from the rapid increase in overseas shares of affiliated companies, Joyang's overseas sales grew rapidly as an important supplier. In 2023, the company's export sales increased 69% year-on-year to 2,239 billion yuan, mainly supplying related companies.
Development trends
In order to meet the challenges of changes in the “human market” of the small household appliances industry, the company has taken many measures: 1) Enrich the product matrix and expand the product category into the field of cleaning and personal care small household appliances with more potential for growth. We will continue to monitor the company's subsequent performance after the acquisition of Beetle. 2) Increase the proportion of direct management and update the image of the official flag. According to Jiuqian data, 1Q24's Tmall flagship store sales were +14% year-on-year, and the optimization effect was remarkable.
Profit forecasting and valuation
We have kept our profit forecast for 2024/2025 largely unchanged. The current stock price corresponds to 15.8 times/14.8 times the 2024/2025 price-earnings ratio. Maintain outperforming industry ratings. Keep the target price unchanged, corresponding to 19.6 times/18.5 times the 2024/2025 price-earnings ratio, and there is 25% room for growth.
risks
Risk of insufficient domestic sales demand, risk of market competition, risk of fluctuating export orders.