Matters:
The company achieved operating income of 11.20 billion yuan in 2023, +9.1% year-on-year, and realized net profit of 1.73 billion yuan, or +10.2% year-on-year. Looking at a single quarter, 23Q4 revenue was 3.27 billion yuan, +7.7% year on year, and net profit to mother was 360 million yuan, +6.2% year over year. 24Q1 revenue was 2.24 billion yuan, +2.8% year on year, and net profit to mother was 40 billion yuan, +2.5% year over year. The company plans to pay a cash dividend of 5 yuan for every 10 shares.
Commentary:
Kitchen appliances are steady and far-reaching, leading the market share in multiple categories. The kitchen appliance industry slowly recovered in 2023. According to Aowei data, retail sales of stoves and stoves totaled 49.2 billion yuan, +5.6% year over year. Retail sales volume was 39.94 million units, +0.2% year over year, and resumed growth at a low base. As a kitchen appliance leader, the boss's growth rate is superior to that of the industry as a whole.
Looking at specific categories, the core product advantages continued. During the reporting period, tobacco stove consumption achieved revenue of 53.2/26.7/4.7 billion yuan respectively, +10.1%/+8.7%/-1.7% over the same period, accounting for a total share of 75.5% of revenue. Among them, the retail sales share of tobacco and stoves all steadily ranked first in the market. The second and third categories have been steadily expanding. The revenue of dishwashers and integrated stoves was 760 million and 460 million respectively, continuing to increase by +27.9% and +20.6% over the same period. The offline share of built-in dishwashers and all-in-one steamers already ranked in the top two. 24Q1 benefited from demand such as early completion and delivery and renovation of old houses. Under Aowei's caliber, the retail sales volume of omni-channel cigarettes and stoves was +4.9% and +7.1%, respectively, and the company's revenue was +2.8% year-on-year, maintaining steady growth with the industry.
Profits increased slightly, and profitability remained stable. The company's net profit returned to mother +10.2% year-on-year in '23, including a reduction of 77.536 million yuan in profit due to bad debts. Previously, the risk of being dragged down by real estate companies and channel provider customers may have basically been released. In terms of profitability, the company's gross margin in 2023 was 50.7%, an increase of 0.7 pct over the previous year. We believe it mainly benefited from product structure upgrades and the company's cost reduction and efficiency. In terms of expenses, the total cost rate for the 23-year period of the company was 32.8%, compared with +0.8 pct. The main reason is that the sales expenses rate increased slightly due to increased brand promotion efforts. Under the combined influence, the company's net sales margin in '23 was 15.3%, +0.14pct year on year, and profitability was steady. In 24Q1, the company's net profit growth rate was 2.5%, and the net interest rate continued to be stable, reaching 17.65%, a slight decrease of 0.12pct over the previous year.
Equity Incentives+Increased Dividends Show Long-term Confidence. Under pressure from the industry, the company increased its dividend ratio and normalized equity incentives, demonstrating the confidence and responsibility of leading companies. The company announced a dividend return plan for the next three years. In principle, cash dividends will be paid once a year for the first and second half of the year. The company's cash dividend ratio from 2024 to 2026 will increase steadily compared to 2023, and the cash dividend ratio will not be less than 50%. In addition, the business partner shareholding plan and the 2024 stock option incentive plan were also announced, which bind the long-term interests of core executives, middle management, and core executives. The overall assessment goals are steady, and it is expected that subsequent incentives may become more normalized. Looking forward to the future, the continuous implementation of policies such as promoting trade-in of home appliances, renovation of old neighborhoods, and promoting the “renewal” of home improvement, kitchen and bathroom, etc., will facilitate the release of demand for kitchen appliance renewal. As a leading high-end brand, the company is expected to benefit as a leading high-end brand on a priority basis.
Investment advice: Considering the pressure to complete real estate, we lowered the company's 24/25 EPS forecast to 1.96/2.15 yuan (original value was 2.11/2.34 yuan) and added the 26-year forecast to 2.31 yuan. The corresponding PE was 11/10/10 times, respectively. Referring to the absolute valuation method, the company's target price was lowered to 27 yuan, corresponding to 14 times PE in 24 years, maintaining the “recommended” rating.
Risk warning: Real estate data has declined sharply, industry competition has intensified, and raw material prices have fluctuated greatly.