1Q24 results are in line with our expectations

The company announced 1Q24 results: 1Q24 achieved revenue of 5.378 billion yuan, +8.38% year over year; net profit to mother of 470 million yuan, +7.23% year over year; net profit after deducting non-return to mother of 461 million yuan, +8.06% year over year. The company's performance was in line with our expectations.

Export sales continued to grow, and domestic sales were rising steadily: 1) 1Q24's revenue was +8.38% year-on-year, with domestic sales growing slightly and export sales growing faster. 2) The company's export revenue mainly comes from related transactions with parent company SEB. SEB's revenue recovered after the end of overseas inventory removal, driving Supor 2H23's export revenue +59.6% year-on-year. Considering the current high export boom and the low 1H23 export base, we estimate that the 1Q24 company's export sales revenue will continue to grow rapidly. 3) In terms of domestic sales, AVC data shows that overall domestic demand for small household appliances is still weak in 1Q24, but the newly-needed categories (such as rice cookers, etc.) 1Q24 has achieved a positive year-on-year growth rate. Supor was quick to respond to changes in the industry, and its market share remained stable.

Financial analysis: 1) As the share of export business with low gross margin increased, the company's 1Q24 gross margin was -0.8ppt to 24.4% year over year. 2) The 1Q24 sales/management/R&D expense ratio remained relatively stable at -0.1pp/ -0.2pp/ +0.1ppt to 10.9%/1.7%/1.8%, respectively. The net profit margin for 1Q24 was -0.1ppt to 8.7% year-on-year, reflecting good cost control capabilities. 3) The 1Q24 company's operating cash flow was +38.5% year over year to 1,043 billion yuan, inventory was -5.6% year over year, and the operation was steady.

Development trends

In terms of export sales, the company previously announced the 2024 SEB order plan of +3.2% year-on-year to 6.110 billion yuan. Considering that the export sales boom has remained at a high level since the beginning of the year, we believe there is still room for improvement in the future. In the long run, SEB's external procurement is large, and there is still potential to increase Supor's orders in the future. In terms of domestic sales, data from Jiuqian and AVC both showed that domestic small kitchen appliances were still under demand pressure in 1Q24. However, the company just needed an advantage in the category. While controlling fees and improving efficiency, it can maintain a stable position in the industry and have alpha at the management level. Furthermore, the company is actively developing high-growth new products and Douyin channels.

Profit forecasting and valuation

Due to strong export sales, we raised our 2024/2025 profit forecast by 2%/2% to 2,406 billion yuan/2,648 billion yuan. The current stock price corresponds to 19.9 times/18.1 times the 2024/2025 price-earnings ratio. Maintain an outperforming industry rating. Considering the increase in the valuation center of the industry, we raised our target price by 4.5% to 70.00 yuan, corresponding to 23.5 times/21.3 times the 2024/2025 price-earnings ratio, with an upward margin of 18%.

risks

There is a risk of market demand fluctuations, increased risk of market competition, and the risk of exports falling short of expectations.