Incident: The company released its 23rd annual report and its quarterly report for '24. In 2023, the company achieved revenue of 2.78 billion yuan, +43.19% year-on-year, net profit to mother of 320 million yuan, +7.92% year-on-year, and net profit after deducting net profit of 310 million yuan, or +8.88% year-on-year. Among them, 23Q4 achieved revenue of 650 million yuan, +60.02% year-on-year, net profit of 58.8 million yuan, +64.93% year-on-year, after deducting net profit of 57.38 million yuan without return to mother, +45.35% year-on-year. The 24Q1 company achieved revenue of 820 million yuan, +46.14% year over year, net profit of 85.29 million yuan, +102.33% year over year, net profit without return to mother of 81.31 million yuan, +101.13% year over year. In terms of dividends, in 2023, it is planned to distribute cash dividends of 3.5 yuan (tax included) to all shareholders for every 10 shares, totaling 130 million yuan (tax included), with a cash dividend rate of about 40.45%.

Vacuum cleaners have been recovering, new customers have been introduced for small household appliances, and auto zero has surged as planned. The home appliance business has been growing steadily for 23 years, thanks to the gradual recovery in demand in the downstream market and the introduction of increased orders from strategic new customers:

1) The vacuum cleaner business achieved revenue of 1.63 billion yuan in 23 years, +18.0% year over year. The impact of inventory removal from the original strategic major customers basically ended, and business demand resumed steady growth; 2) The diversified small household appliance business achieved revenue of 8.2 billion yuan in 23 years, +117.2% over the same period. The new introduction of SharkNinja, an internationally renowned small home appliance company, brought growth, and is expected to continue to grow rapidly in the future. The auto parts business achieved revenue of 200 million yuan in '23, +171.7% over the same period. In '23, it was a major OEM designated in Europe and North America. Currently, it has accumulated more than 2.3 billion fixed amounts from 2024 to 2026, and is expected to continue to grow rapidly in the future with order support.

Exchange rate fluctuations affect profitability. The company's gross margin for 23 years was +1.3 pcts to 19.1% year-on-year. It is expected to be related to the impact of the revenue starting scale, the optimization of the customer structure, and the increase in the profit level of the auto zero business. On the cost side, the company's sales/management/R&D/finance expense ratios in 23 were 0.4%/4.4%/3.6%/-3.0%, respectively, -0.05/-0.7/-0.6/+6.2pcts, respectively. The exchange dividend base was high in '22, and it narrowed in '23 but still benefitted. Under the combined influence, the company's net profit margin for 23 years was -3.8 pcts to 11.6% year on year, and net profit after excluding exchange earnings was 290 million yuan, +93% year over year, corresponding to a net interest rate of 10.3% after restoration, +2.7 pcts year on year. Actual profitability increased steadily. The gross margin of the 24Q1 company was -0.7 pcts year on year to 17.4%. On the cost side, the company's 24Q1 sales/management/R&D/finance expenses ratio was 0.3%/4.6%/3.3%/-1.8%, respectively, -0.4/-0.03/-0.7/-1.8 pcts year on year. Ultimately, the company's 24Q1 net profit margin was +2.9 pcts year on year to 10.3% year on year.

Investment suggestion: The company continues to be deeply involved in motor technology, and while implementing the development strategy of “using vacuum cleaners as a business as a growth business, and EPS motors as a strategic business”, it has recently officially entered the booming robotics field and cooperated with leading domestic humanoid robot companies to open up a new development space for the company after automotive use. Overall, the company has shown superior horizontal expansion capabilities and sufficient growth momentum under deep technology accumulation. The company's net profit for 23-25 is estimated to be 3.2/4.0/50 billion yuan, corresponding to PE 23.1x/18.5x/14.8x, maintaining a “buy” rating.

Risk warning: Product sales fall short of expectations; risk of increased market competition; overseas demand falls short of expectations; risk of current dependence on a single customer.