Incidents:

The company released its 2023 annual report:

In 2023, the company achieved revenue of 1,688 billion yuan, +22.16% year-on-year; net profit to mother was 327 million yuan, +49.71% year-on-year. Among them, 2023Q4 achieved revenue of 572 million yuan, +53.05% year-on-year; net profit to mother was 89 million yuan, +92.11% year-on-year. Q4 Revenue growth was high, and profit performance was impressive. Additionally, the company plans to distribute a cash dividend of 3 yuan (tax included) for every 10 shares.

Iterative product innovation, smart home volume and price rise

In 2023, revenue from the company's smart home products, clothes drying rack products and other products was 1,433, 2.16, and 0.24 million yuan, respectively, +26.39%, +1.58%, and +1.73% year-on-year; gross margins were 53.10%, 44.04%, and 18.05%, respectively, +4.84pct, +6.62pct, and -14.35pct, respectively. All businesses achieved steady growth. Among them, the core smart home products benefited from the continuous iterative innovation of the company's products, online collaborative development of offline channels, sales volume and average sales price Gross margin increased significantly, with +18% and +7% year-on-year respectively.

By channel, e-commerce channel revenue in 2023 was 1,006 billion yuan, +19.38% year over year; gross margin was 53.92%, +5.45pct year on year. The e-commerce channel maintained steady growth, and the gross margin level increased significantly.

Profitability has increased significantly, and investment in sales expenses has increased

In 2023, the company's overall gross profit margin and net margin were 51.35% and 19.36%, respectively, +4.99pct and +3.55pct, respectively. Among them, the 2023Q4 company's gross profit margin and net margin were 53.05% and 15.52%, respectively, +3.30pct and +3.15pct, respectively. Thanks to the increase in the share of the company's intelligent products and the company continued to further promote cost reduction and efficiency measures to optimize production processes, and profitability continued to increase dramatically. In 2023, the company increased its promotion efforts and advertising investment in offline channels and e-commerce platforms. Sales expenses were +33% compared to the same period, and the sales expenses ratio increased by 1.66 pct to 20.33%.

Investment advice:

As a leading enterprise in the smart home industry, Mrs. Good continues to be optimistic about the company's competitive advantage in terms of brand, channel, R&D, etc. It is estimated that the company's net profit for 2024-2026 will be 3.93/4.65/542 million yuan, respectively, +20.16%/+18.31%/+16.46%. The corresponding PE is 16/13/11 times, respectively, maintaining a “buy” rating.

Risk warning:

Downstream demand releases fall short of expectations; risk of large fluctuations in raw material prices; risk of distribution channel expansion falling short of expectations; and increased risk of industry competition.