Export sales of cold washing improved significantly. Q1 performance exceeded expectations. Maintaining a “buy” rating of 2024Q1, the company achieved operating income of 23.49 billion yuan (+20.9% year-on-year, same below), net profit of 980 million yuan (+59.5%) to mother, and net profit of 84 million yuan (+60.9%) after deducting non-return to mother. The company's cold washing export business is expected to achieve rapid growth during the reporting period. Combined with cost reduction and efficiency and structural optimization, the gross margin and expense ratio will gradually improve, driving comprehensive profitability to continue to rise, exceeding expectations. We raised our 2024-2026 profit forecast. We expect net profit to the mother of 33.9/39.5/4.53 billion yuan (original value was 32.7/3.34 billion yuan), corresponding EPS is 2.45/2.85/3.27. The current stock price is 14.6/12.5/10.9 times , maintaining a “buy” rating.
The cold and cold washing business is expected to grow rapidly under a low base, driving high revenue and profit growth. We expect (1) CCAC: Under the overall pressure of real estate, the company is expected to maintain steady growth through a diversified layout of home improvement channels and categories. During the reporting period, the company's new product, Hisense 5G+ Honor Home Series IoT central air conditioning, was launched, and version 2.0 of the full-house all-sensing smart air customization system was launched. The export side is expected to grow faster than domestic sales under a low base. (2) Home Space: According to Industry Online, the 2024Q1 air conditioning industry's domestic/export sales volume was +17%/+22% year over year, and the Hisense brand was +30%/+33% year over year. Both domestic and foreign sales achieved superior growth to the industry. According to Aowei data, among domestic sales channels, Hisense's fresh air conditioning market share reached second place, and the brilliant C310 fresh air cabinet ranked first in the industry. (3) Cold: According to Industry Online, the 2024M1-2 refrigerator industry's domestic/export sales volume was +6%/+62% year over year, and the Hisense brand was +16%/+52% year over year. At the same time, according to customs data, the 2024Q1/2024M3 refrigerator industry's export sales were +28%/+20% year over year, maintaining a high trend. We expect the company's cold export business to achieve rapid growth in revenue and profit levels due to the rapid growth of its own brands, the elimination of low base stocks, the elimination of quality damage, and the gradual decline of the factory, which will drive high growth in Q1 performance. (4) Washing machine:
Sales of 2024Q1 Hisense washing machines were +70.4% year-on-year. According to Industry Online, the sales volume of the 2024M1-2 Hisense washing machine was +66%/+99% year-on-year, respectively. (5) Kitchen appliances: 2024Q1 scale +75% YoY, with exports +202% YoY.
The gross margin is expected to continue to improve with the optimization of the export cold washing category. Profitability enters the upward range of 2024Q1 gross profit margin of 21.6% (+0.5pct). The increase is expected to be mainly due to improvements in the export ice washing category and internal operating efficiency. The period cost ratio is 15.6% (flat). Among them, the sales/management/R&D/finance expenses ratio is 10.0%/2.6%/3.3%/-0.3%/-0.3%, respectively. Under cost reduction and efficiency, the non-R&D rate gradually declined. 2024Q1's net interest rate was 6.5% (+1.2pct), the net profit margin to mother was 4.2% (+1pct), and the net interest rate after deducting non-net interest was 3.6% (+0.9pct). Combined with increased wealth management revenue and tax rebates, profitability continued to rise.
Risk warning: Increased competition in domestic sales, raw material price risk, overseas private brand building falls short of expectations, etc.