Core views:
Hisense Vision released its 2024 quarterly report. The company achieved revenue of 12.70 billion yuan (YoY +10.6%) and net profit of 4.7 billion yuan (YoY -24.8%) in 2024Q1. The company's revenue grew steadily, and its net cash flow from operating activities fell 81.7% year on year, mainly due to changes in sales pace and raw material reserve strategy.
24Q1 industry demand is stable, and the trend of structural upgrading continues. According to DiXian data, the cumulative global/domestic/overseas TV shipments in January-January '24 were -2.0%/+0.6%/-2.5% year-on-year. The overall demand in the industry remains stable, and the trend of large-scale expansion continues. According to data from Aowei Cloud Network, the sales share of 75-inch TVs and above in China increased in 24Q1.
Demand for 24Q2 TV terminals is expected to pick up, and the company's product structure continues to be optimized. The European Cup and Paris Olympics will start one after another in June-July '24, and important sporting events are expected to boost channel stocking and terminal demand. At the same time, the company's product structure continues to be optimized. Among smart display terminal products in mainland China in '23, 75-inch products and above accounted for more than half of sales, and there is still plenty of room for large-scale screen expansion overseas. The intensive opening of sporting events in '24 is expected to drive the company's revenue growth rate to increase and the product structure to continue to be upgraded.
Q1 profit margins were dragged down by panel price increases, and there is still room for future optimization of the product structure. 24Q1 gross profit margin was 15.8% (Yoy-2.4pct), and gross margin declined, mainly due to the overall upward trend in TV panel prices since 23Q1. The overall cost ratio was well controlled. Sales/management/finance/R&D expense ratios were -0.6pct/-0.2pct/+0.1pct/-0.4pct, respectively, and the 24Q1 net interest rate was 4.5% (YOY-1.5pct).
Profit forecast and investment advice: The company's net profit for 2024-2026 is expected to be RMB 23.6, 26.0, and 2.86 billion yuan, respectively, with year-on-year growth rates of 12.8%, 10.0%, and 9.9%, respectively. The latest closing price corresponding to 2024 PE is 14.89x. Referring to the valuation level of comparable companies, the company was given 15 times PE in 2024, with a corresponding reasonable value of 27.17 yuan per share, giving it an “increase in holdings” rating.
Risk warning: Some parts are dependent on the risk of outsourcing, demand in overseas markets is weak, and competition is intensifying.