Incident: On April 22, 2024, the company released its 2024 quarterly report. In Q1 of 2024, it achieved revenue of 12.702 billion yuan, a year-on-year increase of 11%; realized net profit of 467 million yuan, a year-on-year decrease of 25%; and realized net profit without return to mother of 388 million yuan, a year-on-year decrease of 22%.
Key points of investment:
24Q1 revenue was in line with expectations, and performance was slightly below expectations. In 2024, Q1 achieved revenue of 12.702 billion yuan, a year-on-year increase of 11%; realized net profit of 467 million yuan, a year-on-year decrease of 25%; realized net profit without deduction of 378 million yuan, a year-on-year decrease of 22%. 24Q1's revenue is basically in line with our quarterly report forecast, and the performance is slightly lower than expected. It is expected to be mainly due to the company taking the initiative to remove inventory in preparation for European Cup related marketing and develop new channels and new markets.
The market share has increased steadily, fully benefiting from the trend of large screens in the industry. According to summary data from Aowei Cloud Network, the sales volume of China's color TV market in the first quarter of 2024 was 7.06 million units, a year-on-year decrease of 5.3%. Under the influence of high fluctuations in upstream panel prices and the continuation of the trend of structural upgrading in the color TV industry, the color TV market sales in the first quarter were 255 billion yuan, up 12.6% year on year, and the average price was 3,616 yuan, up 18.9% year on year. By size, the sales share of 75-inch and above products in the Chinese color TV market increased overall in 24Q1. Among them, 75-inch products grew the fastest, reaching 21.0%, up 5.2 pcts from 23Q1; 85-inch products increased 3.6 pcts year over year, with a share of 7.4%. In the context of large color TV screens, Hisense's market share has been steadily increasing. According to data from Zhongyikang, Hisense's offline retail sales market share in 24Q1 was 26.5%, up 0.1 pcts from the previous year, ranking first in the industry. According to Aowei data, in the global 100-inch TV market in 2023, Hisense's shipment market share was 44.75%, ranking first in the world; in mainland China's 100-inch TV market and above, Hisense's retail market share was 61.64%, and the company is expected to continue to benefit from the trend of large screens in the industry.
Short-term fluctuations in profitability. 2024Q1 achieved a gross profit margin of 15.76%, a year-on-year decrease of 2.41 pcts. It is mainly due to the company taking the initiative to remove inventory in preparation for European Cup related marketing and explore new channels and new markets. As inventory removal nears its end, the company begins to push new sales prices, and we expect profitability to recover rapidly. In terms of expenses for the period, sales expenses/management expenses ratios were 6.05% and 1.66%, respectively, -0.59 and -0.22 pcts, respectively; the financial expense ratio was +0.14 pcts to 0.19%, and the overall cost ratio level continued to decline. In the end, a net interest rate of 4.53% was recorded, down 1.50 pcts from the previous year.
Maintain profit forecasts and “gain” investment ratings. We maintain our previous profit forecast for the company. We expect the company to achieve net profit of 23.94, 27.61, and 3.177 billion yuan in 2024-2026, with year-on-year increases of 14.2%, 15.3%, and 15.1%, respectively. Corresponding to current price-earnings ratios of 15 times, 13 times, and 11 times, respectively, to maintain an “increase in holdings” rating.
Risk warning: Panel price fluctuation risk; exchange rate fluctuation risk; terminal market demand falls short of expectations.