Operations were under pressure, and Q4 profits were affected by the consolidation of fund-raising projects. In 2023, the company achieved revenue of 1.23 billion yuan/ -3.8%, net profit attributable to mother of 180 million/ -14.6%, and net profit of 160 million/ -6.0% after deducting non-return to mother. Among them, Q4 revenue was 280 million/ -9.6%, net profit attributable to mother was 0.04 million/ -91.9%, and net profit not attributable to mother was 0.1 million/ -65.2%. The company plans to pay a cash dividend of 10 yuan for every 10 shares, with a cash dividend rate of 59%, and an increase of 3 shares for every 10 shares. Affected by demand in the real estate and integrated stove industry, the company's revenue declined; Q4 net profit was affected by the increase in depreciation expenses after the fund-raising project was consolidated, and there was a significant decline.
Demand in the integrated stove industry is being dragged down by real estate. In 2023, the domestic commercial residential sales area fell 8.2% year on year, which had a negative impact on the new demand for kitchen appliances, and retail sales of integrated stoves declined. According to data from Aowei Cloud Network, retail sales of integrated stoves in China fell 4.0% year on year to 24.9 billion yuan in 2023, of which sales volume fell 4.2% year on year; retail sales of 2024Q1 integrated stoves fell 11.9% year on year to 4.2 billion, and sales fell 10.5% year on year.
E-commerce and direct sales revenue are growing rapidly. The company's total turnover in JD and Tmall in 2023 increased 10.7% year-on-year to $90 million, of which H1/H2 was +3.5%/+18.4% respectively. At the same time, the company actively promotes the layout of direct stores in key offline regions, vigorously explores KA, home improvement and other channels, and drives the growth of direct sales revenue. In 2023, the company's direct revenue increased 28.1% year on year to 250 million, and distribution revenue fell 9.4% year on year to 980 million.
Actively expanding new categories, revenue from integrated stoves declined slightly. The company's revenue for integrated stoves fell 5.8% to 1.10 billion in 2023, H1/H2 was -1.1%/-10.1% year-on-year; revenue from other categories such as integrated sinks and integrated dishwashers increased 16.3% year-on-year to 130 million, and H1/H2 increased by +23.1%/+10.0% year-on-year respectively.
The gross margin increased, and the cost ratio was affected by the conversion. The company's gross margin in 2023 was +2.0pct year-on-year to 48.7%, which is expected to benefit from lower raw material costs and changes in channel structure. The company's annual sales/management/R&D/finance expense ratios were +1.2/+2.4/+0.5/+0.0pct to 23.5%/6.2%/5.2%/-1.5%, respectively. The increase in the sales expense ratio was mainly due to increased investment in e-commerce marketing, and the large increase in management expense ratio was mainly due to an increase in depreciation expenses after the restructuring of the fund-raising project. The company's net profit margin fell 1.9pct to 14.6% year-on-year in 2023. The company's Q4 gross margin was +0.1 pct to 45.4% year on year, sales, management, R&D and financial expenses ratio was +0.8/+8.0/+2.7/-0.6 pct, respectively; net profit margin to mother was -14.2 pct to 1.4% year on year.
Risk warning: Prices of raw materials fluctuate greatly; industry competition intensifies; demand for integrated stoves falls short of expectations.
Investment advice: Adjust profit forecasts to maintain a “buy” rating.
Considering the needs of the real estate and integrated stove industry, the profit forecast is adjusted. The company's net profit for 2024-2026 is estimated to be 2.0/2.1/230 million (previous value was 2.3/2.5/100 million), an increase of 11%/8%/7% over the previous year, corresponding to PE 16/15/14 times, maintaining a “buy” rating.