Event: The company released its 2024 quarterly report. 2024Q1 achieved operating income of 5.94 billion yuan, an increase of 18.20% over the previous year; realized net profit of 156 million yuan, an increase of 26.93% over the previous year, and net profit after deducting 186 million yuan, an increase of 79.64% over the previous year.

We expect the company's domestic sales of air conditioners and overall export sales to maintain a relatively rapid growth rate. In terms of domestic sales, the company's domestic sales of air conditioners are expected to grow rapidly. According to Industry Online, the domestic air conditioner sales schedule for 2024 is +62.6%/-13.4%/+17.3% compared to the same period last year; in terms of export sales, the company's export sales are expected to maintain a high growth rate. According to the General Administration of Customs, the export value of the 2024Q1 washer/refrigerator/air conditioner industry also increased by 25.1%/33.2%/5.6%.

The company's profitability remains steady. Gross profit margin: 2024Q1 companies' gross margin -1.27pct year-on-year to 13.39%. Rate side: The 2024Q1 sales/management/R&D/finance rate is 7.03%/1.19%/2.23%/-0.70%, with year-on-year changes of -0.85pct/-0.36pct/-0.32pct/0.07pct, with strong cost management capabilities. Net interest rate: 2024Q1 net margin changed 0.12pct to 2.67% year over year.

The growth rate of the company's net profit after deduction far exceeds the net profit performance attributable to mother, mainly due to losses due to changes in fair value. 2024Q1 lost 36.21 million yuan due to changes in fair value, accounting for 23% of net profit attributable to mother, mainly due to changes in the fair value of the company's irrevocable orders and foreign exchange contracts in the current period.

Cash flow is healthy, and profit reservoirs are sufficient. Judging from the cash flow statement, 2024Q1 received 5.614 billion yuan in cash from sales of products; judging from the balance sheet, the 2024Q1 contract debt was +14.37% year over year, +16.86% month on month; inventory was +38.94% year over year, +68.21% month on month.

Profit forecasting and investment advice. The company's state-owned enterprise reforms have improved quality and efficiency, and are optimistic about business continuity. We expect the company to achieve net profit of 906/10.53/1.95 billion yuan in 2024-2026, an increase of 22.3%/16.2%/13.4% year-on-year, and maintain the “increase” investment rating.

Risk warning: Real estate sales recovery falls short of expectations, weak terminal consumer demand, risk of fluctuating commodity prices, risk of increased market competition, and risk of exchange rate fluctuations.