Domestic sales of 2024Q1 have improved, and a recovery in domestic sales is expected to bring profit elasticity. Maintaining the “Buy” rating company's 2024 quarterly report, 2024Q1 achieved revenue of 2,065 billion yuan (+9.15%), net profit to mother of 130 million yuan (+7.06%), and net profit of 125 million yuan (+7.23%) after deducting non-return to mother. Demand for core categories stabilized in a single quarter, and domestic sales resumed growth after multiple quarterly adjustments. We maintain our 2024-2026 profit forecast and expect net profit to be 4.38/5.00/554 million yuan for 2024-2026, corresponding EPS of 0.57/0.65 billion yuan, respectively. The current stock price corresponds to PE of 20.7/18.1/16.3 times, respectively. Domestic sales continue to optimize the product/channel structure, and upgrade and broaden the price band, focusing on improvements in domestic sales bringing profit elasticity and maintaining a “buy” rating.
Domestic sales of the 2024Q1 have recovered close to double-digit growth. In terms of domestic sales of the new Space Technology series of new products, Aowei Cloud Network data shows that the retail volume of 2024Q1 soy milk machines/wall breakers was +43.36%/-5.82% year over year, and retail sales were +30.82%/-13.32% year on year. Soy milk machines resumed positive growth while the Joyang brand share was stable. After several quarterly adjustments, dealer inventory was gradually optimized, and the share of the company's direct operations continued to increase. Domestic sales are expected to resume close to double-digit growth in 2024Q1. In terms of export sales, related transactions show that sales of products to SharkNinja and JS Global Life and its subsidiaries/subsidiary companies were worth US$18 million as of March 28, 2024 (sales amount of US$0.2 billion as of March 31, 2023), and export sales are expected to remain stable. On April 19, the company held a new product launch conference to launch Space Technology 3.0 series of new products. The zero-coating rice cooker/wall breaker/thermo-cleaner has been upgraded. While space technology products are being held high, the price range continues to be broadened.
Looking ahead to 2024, focusing on improvements in core categories to stabilize domestic sales, household appliances/personal care are expected to gradually contribute to the increase.
The gross margin of domestic sales of 2024Q1 is expected to remain stable, with the sales/R&D expense ratio improving 2024Q1 gross profit margin of 26.92% (-0.95pct). The gross margin of domestic sales is expected to remain stable under category structure optimization and internal cost reduction, and the gross margin of export sales may be disrupted in the short term. On the cost side, 2024Q1 company's sales/management/R&D/ finance expense ratios were 13.23%/4.33%/4.25%/-1.13%, respectively, -0.72/+0.24/-0.22/ -0.64pct year-on-year, respectively. Under the combined influence, the 2024Q1 net profit margin of the company was 6.29% (-0.12pct), and the net interest rate of non-return to mother was 6.07% (-0.11pct) after deducting the net interest rate of 6.07% (-0.11pct). Looking ahead, new core single products will gradually be implemented, and direct management reforms will continue to advance. Focus on the increase in the input-output ratio of domestic sales to drive cost rate improvements and profit increases.
Risk warning: raw material prices are rising; industry sentiment continues to weaken; sales of new products fall short of expectations, etc.