Incidents:
Hisense Video revealed its 2024 quarterly report: in the first quarter, the company achieved operating revenue of 12.702 billion yuan, +10.61% year over year; of this, main business revenue was 11.859 billion yuan, +14.91% year over year; realized net profit to mother of 467 million yuan, -24.81% year on year; net profit without return to mother was 388 million yuan, -21.92% year on year.
The industry demand trend is steady, and the company's revenue performance is excellent
According to DiXian data, global/domestic/overseas TV shipments were -2.0%/+0.6%/-2.5% year-on-year in January-January '24. Although the company actively promoted strategic inventory removal during the reporting period, the company's shipment performance is still expected to outperform the industry as a whole. Among them, the Western European market may have maintained steady growth based on brand building and competition promotion. Further considering the company's global product upgrade pace, the company's average price is expected to rise steadily year on year. Under the comprehensive influence, the company's Q1 main business is +15% year-on-year. Furthermore, it is worth looking forward to the successful completion of inventory adjustments and the upcoming opening of the Q2 European Cup, subsequent sports marketing can be expected to drive the company's global volume and price increases rapidly.
Gross margin is under pressure in the short term, and subsequent profit inflection points can be expected
The company's Q1 gross margin was -2.4 pct to 15.8% year on year, similar to the 23Q4 situation. It is mainly affected by short-term fluctuations in the price of raw materials such as cleaning up old product inventories and panels. It is expected that the subsequent gross margin trend will improve in the context of sports marketing driving an increase in the share of new products starting in Q2; Q1 sales/management/R&D/finance expense ratios were 0.6/-0.2/-0.4/+0.1 pct year on year, respectively. The cost ratio for the period was optimized. However, during the same period last year, the investment income base was high. -1.7 pct; however, considering the increase in the proportion of new products and continuous optimization on the cost side, the inflection point of profit improvement is imminent.
Short-term fluctuations will not change the trend, and sports marketing is ready to go
Q1 The company's net operating cash flow decreased year-on-year, mainly due to changes in sales pace and raw material reserve strategy. Looking at the medium to long term, on the one hand, using sports marketing as an opportunity and product power as a starting point, the company is expected to continue to seize the share of color TV at home and abroad, further consolidating its market position, leading the way to number one in the world; on the other hand, after taking the initiative to clean up inventory, the company is expected to go lightweight, enhance profitability at home and abroad with high-end products, cross the TV panel price cycle, and the new display business is expected to open up the company's growth ceiling.
Davis can be expected to double click to maintain a “buy” rating
The company's revenue for 24-26 is expected to be 605, 686, and 78.2 billion yuan respectively, with year-on-year growth rates of +13%/+13%/+14%, respectively, and performance of 24.2, 29.9, and 3.71 billion yuan, respectively. The year-on-year growth rates are +16%/+24%, EPS is 1.9, 2.3, and 2.8 yuan respectively, and the CAGR for 23-26 is +21%.
In view of the remarkable results of the company's multi-brand strategy at home and abroad, sports marketing is gaining momentum, and the global share is increasing. We gave the company 18 times PE in 2024, a target price of 33.41 yuan, and maintained a “buy” rating.
Risk warning: 1) Domestic and foreign demand falls short of expectations; 2) Raw material prices and exchange rates fluctuate greatly.