2024Q1 has steady revenue, continues to be optimistic about the company's share and profit growth, and maintains a “buy” rating
2024Q1 achieved revenue of 12.702 billion yuan (+10.61%), main business revenue of 11.859 billion yuan (+14.91%), net profit of 467 million yuan (-24.81%), net profit of non-return to mother of 378 million yuan (-21.92%). The revenue growth rate increased sequentially in a single quarter, and the main business revenue growth rate continued to be higher than the overall revenue growth rate. Short-term large-scale events are expected to catalyze a recovery in demand and panel cost pressure is expected to improve quarterly. In the long term, we are optimistic about deepening overseas channels+sports event marketing, and increasing product competitiveness to drive a continuous increase in share. We maintain our profit forecast. We expect net profit to be 24.06/27.99/3.193 billion yuan for 2024-2026, corresponding EPS is 1.84/2.14/2.45 yuan, and the PE corresponding to the current stock price is 14.6/12.6/11.0 times, maintaining a “buy” rating.
The steady growth of the Q1 display business, and the increase in brand power/narrowing of the channel and product gap will drive the share to continue to increase 2024Q1's main business revenue by +14.91% year-on-year. It is expected that both domestic and foreign sales of smart display terminals will achieve superior growth than the industry. In terms of domestic sales, Aowei Cloud Network data shows that in 2024Q1 Hisense TV retail volume/retail sales were -1%/+20% year-on-year (industry retail sales volume -3% year-on-year), and industry concentration continued to increase. In terms of export sales, DiXian data shows that the 2024M1-M2 Western Europe/Latin America/Middle East Africa market shipment performance is outstanding. The company continues to deepen its overseas market channels and upgrade its product structure, and it is expected that overall growth will continue to be steady. In the long run, considering the weakening of the supply chain advantages of Japanese and Korean brands and the narrowing of the product competitiveness gap between Chinese, Japanese, and Korean brands, we continue to be optimistic about the increase in global share of Chinese brands represented by Hisense, driven by strong product strength, enhanced brand power, and continuous channel deepening.
2024Q1 costs are fluctuating in stages, and we continue to be optimistic that cost improvements+structural upgrades will drive profit margins upward 2024Q1 gross profit margin of 15.76% (-2.41pct). The gross margin declined year-on-year or is mainly due to the current panel costs still high, but domestic sales gross margin is expected to improve with terminal transmission. On the cost side, the cost rate during 2024Q1 was 12.04% (-1.04pct), and the sales/management/R&D/finance expense ratios were 6.05%/1.66%/4.13%/0.19%, respectively, -0.59/-0.22/-0.37/+0.14pct, respectively. The cost ratio was continuously optimized under strong cost control. Under the combined influence, the 2024Q1 net profit margin was 3.67% (-1.73pct), after deducting the non-return net interest rate of 2.98% (-1.24pct). Looking ahead, Lotu Technology data shows that in May 2024, the price of 55/65/75/85/98 inch panels is expected to increase by 2/3/3/0/0 US dollars, respectively. Although panel prices continue to rise, the increase is narrower than in 2023. As the competition and large sales demand for panels come to an end, it is expected that panel prices will stabilize, cost pressure, or improve quarterly by quarter, and the company will continue to upgrade its product structure at home and abroad. It is expected that gross margin/profit margin will continue to rise steadily in the future.
Risk warning: Panel prices have risen more than expected; overseas demand has declined rapidly; overseas expansion falls short of expectations, etc.