Profits are improving, the performance growth rate is impressive, and the “gain” rating is maintained
The company issued a performance announcement, and achieved revenue/net profit to mother of 7.795/924 million yuan respectively in 23 years, +7.22%/+17.85%, respectively; achieved revenue/net profit to mother of 15.83/121 billion yuan respectively in 24Q1, +5.35%/+23.48% year-on-year, respectively. Considering that the benefits of the company's platform-based reforms continue to blossom and profitability gradually increase, we adjusted the company's 24-25 EPS forecast values to 1.43 yuan and 1.62 yuan (previous values: 1.35 and 1.54 yuan), respectively, and introduced a 26-year EPS forecast value of 1.82 yuan. Comparatively, the company's 2024 Wind unanimously anticipated an average PE value of 19x, giving the company 19x PE in 2024, corresponding to a target price of 27.17 yuan (previous value: 26.62 yuan), maintaining the “gain” rating.
Reforms have improved operational efficiency, deepened channel construction and enhanced comprehensive competitiveness. The company's revenue in '23 was +7.22% (of which 23Q4 was +10.50%) and +5.35% year-on-year in 24Q1. Since the beginning of '23, the company's digital transformation has continued to show benefits. By building a digital marketing ecosystem, the company effectively supervises sales activities in various processes to improve operation and management efficiency. The company's inventory turnover days in 2023 was 44.29 days, a year-on-year decrease of 9.73 days. In terms of sales repayment, the company continued its loan credit policy. The number of accounts receivable turnover days in 2023 was 29.05 days, an increase of 2.58 days over the previous year. At the same time, the company continuously optimizes channels: offline continues to optimize the image and experience of terminal stores, and sets benchmark projects in various commercial license segments; online through diversified marketing methods such as content marketing and KOL cultivation, the online product structure has moved upward to increase online gross profit margin.
Gross profit margin increased dramatically, and marketing investment continued to increase
The company's gross margin for 23 years was 40.33%, up 4.61 pct year on year, the highest in the last five years. It is mainly due to the price advantage of raw materials, the cost reduction and efficiency of platform-based reforms, and continuous optimization of the business structure. On the cost side, the company continued to increase marketing investment, accelerate channel expansion, and expand explosive products. In '23 and 24Q1, the company's sales expenses were +25.01%/+13.57%, respectively, and sales expenses were +2.63/+1.39pct, respectively. In '23, the company's financial expenses were -201.00% year over year, and the financial expenses ratio was -0.91 pct year over year, mainly due to an increase in interest income. The company's net interest rates for '23 and 24Q1 were 11.93%/7.66%, respectively, +1.13/+1.18pct. The trend of improving profitability did not change.
Demand may gradually recover, and the full lighting business is expected to achieve high growth
Affected by the slow recovery of real estate, China's lighting industry as a whole was under pressure in '23. According to data from the National Bureau of Statistics, China's residential sales area in '23 was 948 million square meters, -8.20% year-on-year.
Since the beginning of the year, with the introduction of a series of real estate policies and consumer promotion policies, it is expected that demand for terminals may gradually recover. Among them, fields such as smart homes, smart commerce, and smart cities may have broad market prospects. On this basis, the company further promotes digital intelligence development and platform-based construction, and continues to upgrade products and solutions. It is expected to open up a new growth curve through the whole-house intelligent lighting business on the basis of further consolidating the traditional lighting business.
Risk warning: increased market competition; rising raw material prices; risk of fluctuations in the real estate industry.