Incident: OP Home releases its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2.0 billion yuan, YoY +6.2%; realized net profit to mother of 310 million yuan, YoY +28.8%. According to the company's announcement, the 2023Q4 company achieved revenue of 630 million yuan in a single quarter, YoY +3.2%; realized net profit of 110 million yuan to mother, and YoY +36.4%. 2024Q1 achieved revenue of 380 million yuan, YoY +10.1%; realized net profit to mother of 50 million yuan, YoY +9.8%. The company announced a profit distribution plan. It plans to distribute a cash dividend of 8.0 yuan (tax included) for every 10 shares, totaling about 310 million yuan, with a dividend rate of 99.99%. The company also announced the “Dividend Return Plan for the Next Three Years (2024-2026)”. The plan stipulates that the company will distribute profits at least once a year during the planning period, and that the profit from the annual cash distribution shall not be less than 50% of the distributable profit achieved in that year. Q1 Oppo Home Furnishing's business was steady, and revenue growth accelerated month-on-month in a single quarter. The company's dividend ratio is high, and the dividend plan further guarantees the company's dividend level for the next three years.
The company's revenue growth accelerated in Q1: According to our judgment, the company's main sales channel situation in 2024Q1 is: 1) According to Jiuqian data, Opp's 2024Q1 online Douyin sales YoY was +82%, and the Douyin channel continued to grow at a high rate. We judge that the company's e-commerce channel revenue has achieved rapid year-on-year growth, with the fastest growth rate among all channels; 2) the company is actively developing offline dealers and promoting the decline of offline physical channels. We judge that the company's offline physical channel Q1 has also achieved rapid growth; 3) Opp Engineering Channel has a leading advantage in the Yuba field, but due to changes in the national completion area, we judge that the company's engineering channel Q1 is under pressure.
Yuba products lead revenue growth: According to the company's announcement, the company's electrical revenue growth rate in 2023 increased 11.0% year-on-year, faster than the company's overall revenue. We judge that the company's Q1 bathtub growth trend continues, and electric clothes dryers have also achieved relatively rapid growth. The company recently released the Opal Beauty Cabin Yuba, which can simultaneously achieve various beauty effects based on traditional yuba functions, leading the industry to achieve product innovation. We believe that Opp, as a leading enterprise in Yuba, is actively developing new products and channels, and revenue is expected to continue to grow steadily.
Q1 Gross margin increased year on year: According to the company announcement, 2024Q1's gross margin increased by 1.1 pct year on year, mainly due to the rapid increase in revenue from high-margin electrical appliances. The company's 2024Q1 net profit margin was 13.6%, which was basically the same as the previous year. The company's Q1 sales and management expenses ratio was +1.0pct, respectively, and e-commerce marketing investment increased. We believe that the company continues to optimize its product structure, reduce internal costs for Yuba products, and expect future profitability to continue to improve.
Investment advice: Opp is a leading enterprise in the domestic Yuba industry, leading its peers in product innovation capabilities. Relying on products, the company strengthens its omni-channel layout, and brand awareness is expected to continue to increase. The company continues to explore new categories around the dual genes of home appliances and household appliances, which is expected to further open up room for growth. We expect Op Home's EPS from 2024 to 2025 to be 0.89/1.03 yuan respectively, maintaining a buy-A investment rating. The target price for 6 months is 15.13 yuan, which corresponds to a dynamic price-earnings ratio of 17 times in 2024.
Risk warning: Prices of raw materials have risen sharply, and the real estate industry is declining.