1Q24 revenue declined slightly year on year, and net profit to mother continued to improve. Maintaining the 2024 quarterly report disclosed by the purchasing company, the company achieved revenue of 159 million yuan, -6.52% year over year, and net profit to mother of 223 million yuan, or 28.25% year on year. We maintain our 2024-2026 EPS forecast of 0.30, 0.32, and 0.37 yuan. As of 2024/4/24, Wind unanimously expects the company's average PE to be 21.5x in 2024. Although domestic demand is still fluctuating, overseas business has clearly recovered, and overseas brand business has resumed growth. At the same time, the company is a scarce target for high-end small household appliances, and considering the continuous promotion of the company's cost optimization and cost reduction, net profit recovery expectations are still strong, giving the company 31xPE in 24, corresponding to a target price of 9.3 yuan (previous value 9.0 yuan) yuan), maintaining a “buy” rating.

The downward trend in domestic revenue in 1Q24 has not been reversed, and overseas growth is positive in the domestic market. The domestic revenue of the 1Q24 Beiding brand was -17.3% year-on-year. According to data from Aowei Cloud Network, online retail sales of small kitchen appliances in 1Q24 were -0.3% year-on-year, and demand performance was weak. In overseas markets, the 1Q24 Beiding brand's overseas/ODM revenue was +28.2%/+32.5%, respectively. Among them, the overseas independent brand business was adjusted from a self-operated model in early 23 to a distribution model. Currently, the impact on the base has been eliminated, and quarterly growth has resumed year-on-year growth. Driven by overseas inventory replenishment demand, the ODM business has maintained a positive growth trend since 3Q23.

Although gross margin declined year over year, it was mainly affected by the increase in overseas share. The year-on-year increase in gross sales margin was affected by the increase in the share of overseas business. The company's gross margin declined year-on-year. The company's gross margin for 1Q2024 was 49.68%, -2.02 pct year on year. Under the influence of the company's continued increase in internal efficiency, optimized cost investment, and the increase in the share of exports, the overall cost ratio of the 1Q2024 company was 5.04pct year-on-year. Among them, the sales expense ratio was -3.3 pct year over year, the management expense ratio was -0.01 pct year over year, the R&D cost ratio was -0.54 pct year over year, and the financial cost ratio was -1.18 pct year over year. Taken together, the 1Q24 gross sales gap was +1.28pct year over year.

Operating leverage optimization, optimistic about full-year net profit margin restoration

The company's net interest rate recovered to 10.73% in the short term. In the short term, the 1Q24 company's net interest rate reached 14.2%, which is better than the average net profit margin level of 13% in 2019-2021. While the company continues to increase internal efficiency, overseas OEM continues to grow, overseas brand revenue has resumed growth, and the domestic offline trend has maintained a positive trend, or further driven the optimization of operating leverage. We are optimistic about the recovery of the company's profit margin level throughout the year.

Risk warning: Domestic market development is blocked. Overseas demand fluctuates. Competition in the industry has intensified.