Incident: Shiyuan Co., Ltd. announced its 2023 annual report and 2024 quarterly report. The company achieved revenue of 20.07 billion yuan in 2023, YoY -3.9%; realized net profit to mother of 1.37 billion yuan, YoY -33.9%. After conversion, 2023Q4 achieved revenue of 4.79 billion yuan, YoY -3.1%; realized net profit of 310 million yuan, YoY -35.7%. 2024Q1 achieved revenue of 4.49 billion yuan, YoY +19.6%; realized net profit of 180 million yuan, YoY -37.2%. As the domestic economic environment improves, the company's education business and corporate conference business are expected to recover.

Q1 Revenue achieved rapid growth: 2024Q1's revenue resumed rapid growth, and we judge that it was mainly driven by overseas business and household appliances business. According to the company's annual report, while ensuring a stable share of leading customers, the company's overseas ODM business seizes the opportunities of education informatization in India and some European countries; continues to promote the construction of MAXHUB, an overseas independent brand, continuously enriches the product matrix, and actively cooperates with Microsoft, Intel and other companies.

The company's household appliances business maintains close cooperation with domestic customers on the one hand, and actively expands overseas customers on the other. The household appliances business grew 60% year over year in 2023. Affected by fierce price competition in the domestic education tablet market, we judge that Q1's domestic education business is under pressure.

Q1 profitability declined year on year: Q1 company's net return interest rate was 4.0%, -3.6 pct year on year. Q1 The decline in the company's net interest rate was mainly dragged down by a sharp drop in gross margin. Q1 The company's gross margin was 7.2pct year on year, mainly because: 1) Competition in the domestic education interactive tablet market is fierce, the price of the company's education interactive tablet is under pressure, and the gross margin has declined. 2) The price of LCD panels, the main raw material for interactive tablets, has risen. According to Wind data, the average price of the 55-inch and 65-inch 2024Q1 panels is YoY +39%/+38%, respectively.

Q1 net operating cash flow declined year on year: Q1 Company's net operating cash flow for the single quarter was -250 million yuan year on year, mainly because the company increased raw material reserves in response to rising panel prices. Q1 The company purchased goods and received labor payments in cash of +990 million yuan over the same period last year.

Investment advice: The company is a leading supplier of LCD main control boards and interactive smart tablets in China. In recent years, the company has been actively developing new business directions such as education C-side business, overseas business, and household appliance components. The company's EPS for 2024 to 2026 is expected to be 1.77/2.03/2.32 yuan, respectively, maintaining a buy-A investment rating, giving it a price-earnings ratio of 22 times that of 2024, which is equivalent to a six-month target price of 38.89 yuan.

Risk warning: Panel prices have risen, and industry competition has intensified.