Revenue and profit both increased, and operational efficiency improved. The company released its 2023 annual report, with 2023 revenue of 1.69 billion/+22.2%, net profit to mother of 330 million/ +49.7%, net profit of 320 million/ +46.2%; 2023Q4 revenue of 570 million/ +53.1%, net profit to mother of 90 million/ +92.1%, net profit of non-return to mother of 90 million/ +110.1%. The company increased offline channel expansion, diversified online operations, two-wheel drive scale growth, significant cost reduction and efficiency, and optimized profits. Inventory and accounts receivable in 2023 were -19.6%/-9.6% year-on-year, respectively, improving operating efficiency and quality. It is proposed to distribute a cash dividend of $3 (tax included) for every 10 shares.
Smart homes lead growth, and the product structure continues to be optimized. According to CSHIA Research, the size of the smart clothes dryer industry was +22.1% year-on-year to 12.7 billion in 2023, making it one of the fastest growing categories of smart homes. The company continues to iterate on smart drying products, focusing on technologies such as intelligent stroke adaptation, gesture sensing, and sun tracking and drying, and continues to strengthen its leading position. In 2023, smart home revenue with smart drying and smart locks as the core was +26.4% to 1.43 billion, accounting for +2.9pct to 85.7% of the main revenue; traditional drying rack revenue was +1.6% to 220 million, achieving steady growth.
Online and offline growth is impressive, engineering channels are stable, and channels are refined. E-commerce revenue in 2023 was 1.01 billion/ +19.4%. Traditional online platforms such as Tmall and JD grew steadily, and the deployment of new platforms such as Douyin was accelerated.
Offline revenue in 2023 was 670 million/ +26.5%, of which the South/North District was +22.5%/32.4% to 380 million/280 million. The offline region stabilized “pioneering and revitalizing the field” campaign, dividing and zoning with accurate investment, the company accelerated channel sinking, deepening the layout of new channels such as hardware stores, new retail, KA, etc., and empowering dealers in all aspects through various training and supporting policies; among them, the engineering channel is expected to stabilize. While reaching good cooperation with state-owned enterprises and home improvement property companies, it is also actively exploring cross-industry cooperation models and new scenarios.
Product upgrades, cost reduction and efficiency increase gross profit margin, and excellent profitability. In 2023, the company's gross margin was +5.0pct to 51.4% year on year, with the gross margin of smart home/clothes drying rack +4.8pct/+6.6pct respectively. It is expected to mainly benefit from increased sales volume, increased share of intelligent products, and cost reduction and efficiency implementation such as self-supply of core devices; annual sales/management/R&D/finance expense rates are 20.3%/5.2%/3.1%/-0.5%, respectively, +1.7pct/-0.4pct/-0.02pct/+0.1pct. The increase in sales expenses is mainly due to offline channel expansion and electricity Increased sales of commercial promotions, etc. In 2023, the company's net interest rate was +3.6 pct year on year to 19.4%. Among them, the Q4 net interest rate was +3.2 pct year on year to 15.5%, and the profit level increased significantly.
Risk warning: raw material prices fluctuate, market competition increases risk, real estate market regulation risk.
Investment advice: Adjust profit forecasts to maintain a “buy” rating.
The company is a leader in the smart drying segment, leading the brand recognition rate and omni-channel layout advantages, and is also fully active in the smart home circuit. After adjusting the profit forecast, net profit for 2024-2026 is expected to be 3.9/4.8/580 million yuan (previous value: 40/47/100 million), with a year-on-year growth rate of 19.6%/21.6%/21.0%. The current stock price corresponds to PE = 15/12/10 times. Maintain a “buy” rating.