Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2.78 billion yuan, an increase of 43.2% year on year; realized net profit of 320 million yuan, an increase of 7.9% year on year; realized deducted non-net profit of 310 million yuan, an increase of 8.9% year on year. Looking at a single quarter, Q4 achieved revenue of 650 million yuan, a year-on-year increase of 60%; realized net profit of 60 million yuan, an increase of 64.9%; and realized net profit of 60 million yuan after deduction, an increase of 45.3% over the previous year. In 2023, the company's cash dividend was 130 million yuan, and the cash dividend ratio fell 4pp to 40.5% year-on-year. In 2024, Q1 achieved revenue of 820 million yuan, a year-on-year increase of 46.1%; realized net profit to mother of 90 million yuan, an increase of 102.3% over the previous year; and realized deducted non-net profit of 80 million yuan, an increase of 101.1% over the previous year.

Demand in the home appliance business is picking up, and the auto zero business is gradually being implemented. By product, the sales volume of the company's vacuum cleaners, small household appliances, and EPS motors in 2023 was 6.352 million units/10.268 million units, respectively, +18%/+48.3%/+175.4%, respectively, achieving revenue of 1.63 billion yuan/82 billion yuan/200 million yuan, respectively, +18%/+117.2%/+171.7% year-on-year respectively. Vacuum cleaners and small household appliances mainly benefited from falling inventory levels from major customers and picking up demand. In addition, small appliances were newly introduced into the internationally renowned company KnNinja As an increase, EPS motor growth stemmed from the continuous implementation of fixed and mass production projects in the early stages, maintaining a rapid growth trend; in the subregion, domestic and foreign sales achieved revenue of 530 million yuan/2.16 billion yuan, respectively, +20286.7%/+16.2% compared to the same period last year.

The gross margin of each product improved markedly, and the reduction in exchange earnings led to an increase in the cost ratio. The company's gross margin increased by 1.3 pp to 19.1% year-on-year in 2023, with gross margins of vacuum cleaners/small household appliances/EPS motors being 17.1%/23%/10.3%, respectively, +0.9pp/+5.1pp/+8.7pp. On the one hand, the company improved the gross margin level by improving the self-control rate of core links, integrating the supply chain, and optimizing R&D and design. On the other hand, changes in exchange rates also helped improve gross margin. In addition, as the volume of the auto zero business declined, the gross margin of EPS motors also improved significantly; by region, domestic/overseas The gross margin of the business was 16.9%/19%, respectively, +29.2pp/2.8pp year-on-year, respectively. In terms of expense ratios, the company's sales/management/finance/R&D expenses rates in 2023 were 0.4%/4.4%/-3%/3.6%, respectively, compared to 0pp/-0.7pp/+6.2pp/-0.6pp. The financial expense ratio mainly increased due to a decrease in exchange earnings over the same period, and the operating expenses rate declined steadily; in terms of net interest rates, the company's net interest rate decreased by 3.8pp to 11.6% year on year in 2023

24Q1 revenue remained high, and profitability improved markedly. The company achieved revenue of 820 million yuan in Q1 2024, an increase of 46.1% year on year; gross margin decreased by 0.7 pp to 17.4% year on year, mainly due to the increase in the share of motor revenue with low gross margin; in terms of cost ratio, the company's sales/management/financial/ R&D expenses ratio in 2024 was 0.3%/4.6%/-1.8%/-3.3%, respectively, -0.4 pp/1 pp/-1.8pp/0.7pp, respectively, with good cost rate control. Looking at net interest rates, the company's net interest rate increased by 2.9pp to 10.3% year-on-year in Q1 in 2024.

Profit forecasting and investment advice. The company's home appliance business continues to expand new customers, increase its share among customer suppliers, upgrade the product structure, and gradually implement the auto parts business to improve profitability. The company's 2024-2026 EPS is expected to be 1.08 yuan, 1.37 yuan, and 1.68 yuan respectively, maintaining the “hold” rating.

Risk warning: Risks such as fluctuations in raw material prices, exchange rate fluctuations, and EPS motor emissions falling short of expectations.