Incident: On April 24, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 1,560 billion yuan, an increase of 4% over the previous year; realized net profit of 202 million yuan, an increase of 13% over the previous year; and realized net profit withheld from mother of 193 million yuan, an increase of 16% over the previous year.
Key points of investment:
24Q1 revenue and performance fell short of expectations. The company achieved revenue of 1,560 billion yuan in 2023, an increase of 4% over the previous year; achieved net profit of 202 million yuan, an increase of 13% over the previous year; and realized net profit without deduction of 193 million yuan, an increase of 16% over the previous year.
Among them, Q4 achieved revenue of 300 million yuan in a single quarter, a year-on-year decrease of 33%; realized net profit to mother of 0.26 million yuan, a year-on-year decrease of 44%; and realized net profit without deduction of 0.26 million yuan, a year-on-year decrease of 45%. The Q1 quarter of 2024 achieved revenue of 320 million yuan, a year-on-year decrease of 15%; realized net profit of 10 million yuan, a year-on-year decrease of 78%; realized net profit without deduction of 190 million yuan, a year-on-year decrease of 76%. The company's 24Q1 revenue and performance fell short of expectations, mainly due to the high number of new product launches in Q1 and large changes in first-line production personnel after the holiday season, resulting in lower production efficiency.
Air fryers are growing steadily, laying out new categories and overseas production capacity, and opening up room for growth. In 2023, the company's air fryer category achieved revenue of 1,182 billion yuan, an increase of 8.13% over the previous year, accounting for 75.77% of the company's total revenue. While taking root in the main business, the company is actively seeking upward multi-category matrix development. In 2023, we have successfully completed R&D and production of the coffee machine category, pioneered the development of new categories, and promoted self-research projects in other categories such as ice machines, milk frothers, and environmental appliances in an orderly manner.
At the same time, in order to effectively promote the continuous expansion of the export market, in 2023, the company set up a second-tier subsidiary, Thailand's Fuhaoda, in Rayong Province, Thailand, and invested in the construction of a Thai kitchen appliance factory project through the establishment of a new route company, Fuyi Hong Kong and Riethotel Singapore.
The project is estimated to have a total investment of 50 million US dollars. Currently, the first phase of construction is underway. After completion, it will mainly be used for the manufacture of the company's air fryers, coffee machines, and future small household appliances, and is expected to contribute 7 million units of production capacity.
24Q1 profitability is under pressure. In 2023, the company achieved a gross profit margin of 21.21%, up 1.66 pcts year-on-year. In terms of period expenses, sales expenses ratio/management expense ratios were 1.11% and 2.64%, respectively, -0.03 and +0.52 pcts year over year; financial expenses ratio was -1.85%, up 0.32 pcts year on year. In the end, a net sales margin of 12.92% was recorded, an increase of 1.04 pct over the previous year. The 24Q1 company achieved a gross profit margin of 12.95%, a year-on-year decrease of 8.14 pcts, mainly due to large changes in first-line production personnel after the holiday season, leading to lower production efficiency. As subsequent production personnel stabilized, gross margin was expected to improve. 24Q1 achieved a net sales margin of 3.12%, a year-on-year decrease of 9.14 pcts.
The profit forecast was lowered to the “Overweight” rating. We lowered our previous profit forecast for the company. It is estimated that in 2024-2025, we can achieve net profit of 2.22 billion yuan and 245 million yuan (previous values were 272 million yuan and 350 million yuan), respectively, and the profit forecast for 2026 was 278 million yuan, up 9.8%, 10.7%, and 13.4%, respectively. We compared Supor, Joyang Co., Ltd., Xinbao Co., and Little Bear Electric. The average PE of the comparable company in 24 was 17 times, and the company's PE in 24 was 14 times. Corresponding to the current market value, there is room for a 19.9% increase in market value. Considering the company's small size, we gave a certain valuation discount and downgraded it to an “increase in holdings” investment rating.
Risk warning: risk of exchange rate fluctuations; risk of fluctuations in raw material prices; increased risk of market competition.