Brief performance review
On April 25, the company released its quarterly report for the year 24. In 24Q1, the company achieved revenue of 520 million yuan, +32.3% year over year, and net profit to mother of 60 million yuan, +47.2% year over year, with excellent performance.
Management analysis
Q1 independent brands continue to perform well to support superior revenue growth: According to statistics from Jiuqian Zhongtai, the GMV of the three major e-commerce platforms Rite brand smart toilets increased by more than 158% year on year. Independent brands continued to perform well in e-commerce channels, and the company's offline channels are expanding simultaneously. In particular, the expansion of the home appliance channel is progressing smoothly. Overall independent brand revenue is expected to increase by more than 150% year on year. Among them, the growth rate of offline channels is or faster than e-commerce channels, and the effects of omnichannel efforts are gradually showing. In addition, the company's flush component foundry business revenue is expected to achieve double-digit year-on-year growth, while the smart toilet foundry business relies on overseas market expansion, and Q1 revenue is expected to improve year over year.
The development of independent brands led to an increase in gross margin: 2024Q1 gross margin was +5.0 pct to 30.2% year on year. It is expected that the revenue share of own-brand smart toilet products with high gross margins will increase. In terms of cost ratio, Q1 company's sales/management/R&D expenses ratio was +5.8/-1.7/+0.1pct to 11.7%/4.4%/4.3%, respectively. The increase in sales expenses is expected to be mainly due to the company's increased omni-channel marketing of its own brands. In addition, the company's financial expenses for Q1 were -4.317 million, compared to +3.3333 million for the same period last year, mainly due to certain exchange earnings in Q1.
The dividend period for the increase in smart bathroom penetration rate, and category+channel expansion supports the continued excellent growth of independent brands: Currently, the penetration rate of China's smart bathroom industry is still relatively low compared to mature overseas countries. It is in the early stages of development, and there are still dividends for increasing the penetration rate of the subsequent industry. Under these circumstances, the company relies on its own R&D and manufacturing advantages to establish excellent quality, and the scale effect is showing, the cost advantage is gradually showing, and the overall product cost performance advantage is outstanding, laying a solid foundation for the company's channel and even category expansion. In terms of channels, in addition to further deepening e-commerce channels to increase market share, offline building materials channel companies currently cover few stores. After the gradual improvement of products and after-sales systems, offline store development is expected to accelerate, and now the company has also developed home appliance channels, relying on cost-effective products and giving channels better profit margin. The speed of development of emerging channels is worth looking forward to. In terms of category, while the company uses smart toilets as the core, it is expected that smart bathroom space series products such as smart showers and faucets will gradually expand as brand awareness gradually increases. Overall, the company's comprehensive capabilities have been gradually improved, categories and channels have been smoothly expanded, and independent brands can be expected to continue to grow excellently.
Profit Forecasts, Valuations, and Ratings
We expect the company's 24-26 EPS to be 0.65/0.80/0.97 yuan, respectively. The current stock price corresponds to PE 18/15/12 times, maintaining a “buy” rating.
Risk warning
Prices of raw materials have risen sharply; independent brand promotion is poor; and the RMB exchange rate has fluctuated greatly.