2024Q1 performance exceeded expectations, home appliance foundry and automobile motors were driven by two-wheel drive, maintaining a “buy” rating

Revenue of $2,775 million in 2023 (+43.2%, YoY, same below), net profit attributable to mother was $322 million (+7.9%), after deducting non-net profit of $315 million (+8.9%). 2024Q1's revenue was 825 million yuan (+46.1%), net profit attributable to mother was 85 million yuan (+102.3%), after deducting non-net profit of 81 million yuan (+101.1%). 2024Q1's performance exceeded expectations. The basic market for home appliances expanded customers and categories, and EPS motors continued to gain high quality targets. Humanoid robot motors opened up room for growth. We slightly raised 2024-2025 and added a profit forecast for 2026. We expect net profit to be 4.1/5.4/670 million yuan (the original value for 2024-2025 was 41/550 million yuan), corresponding EPS was 1.10/1.44/1.81 yuan. The current stock price corresponds to PE 18.2/13.8/ 11.0 times, maintaining a “buy” rating.

The home appliance business continues to expand customers and categories. In 2023, the company's home appliance sector/automobile sector achieved revenue of 24.81/202 billion yuan respectively, +38.98%/+171.69% year-on-year, and the home appliances/automobile sector accounted for 92.48%/7.52% of the main revenue, respectively.

(1) The home appliance business expands customers and categories: The growth of the home appliance business is due to the gradual recovery in demand in the downstream market and the increase in orders for the introduction of new strategic customer SharkNinja. At the same time, the development of dishwasher products in 2023 is expected to continue to contribute to the increase. (2) There are plenty of orders for automotive motors in hand, and they continue to be recognized by customers: in 2023, the company obtained 4 new designated projects for EPS motors and brake motors, with a total sales amount of more than 1.4 billion yuan over the entire life cycle, and a total fixed amount of over 2.3 billion yuan from 2024 to 2026. Looking at revenue by region, the company's domestic/export sales revenue in 2023 reached 525/21.57 billion yuan respectively, +203 times/+16.17% year-on-year, respectively.

Significant optimization of 2024Q1 fees and increased profitability

The company's gross profit margin in 2023 was 19.11% (+1.33pcts), and the 2024Q1 gross profit margin was 17.43% (-0.67pcts). By product, the gross margin of the company's vacuum cleaner business/diversified small household appliances business/EPS motor in 2023 was 17.10%/23.00%/10.28%, respectively, +0.89/+5.11/+8.73 pcts year-on-year, respectively. On the cost side, the cost rate for the 2023 company period was 5.42% (+4.9pcts), and the 2024Q1 company period expense ratio was 6.47% (-2.95pcts). Among them, the sales/management/R&D/finance expense ratios were -0.41/-0.03/-0.67/-1.85pcts, respectively. Under the combined influence, the company's net interest rate due to mother was 11.61% (-3.80pcts) in 2023, after deducting 11.34% (-3.57pcts) of non-return net interest rate.

The 2024Q1 company's net profit margin was 10.34% (+2.87pcts), after deducting the non-return net interest rate of 9.86% (+2.70pcts).

The 2023 dividend rate was 40.45%.

Risk warning: Overseas demand falls short of expectations, rising raw material costs, new business expansion falls short of expectations