Key points of investment:
Maintain an “Overweight” rating. The company released its 2024 quarterly report, and the results were in line with expectations. Maintain the 2024-2026 EPS forecast of 2.52/2.74/2.86 yuan, refer to the industry average, give the 24-year PE 26X, raise the target price to 65.52 yuan, and maintain the “gain” rating.
Revenue has increased steadily, and profits have grown rapidly. 24Q1 revenue of 10.774 billion yuan (+2.5%), growth was steady. Net profit attributable to mother was $1,702 million (+12.1%), after deducting non-net profit of $1,690 billion (+20.5%). The high growth rate is expected to be mainly due to increased gross margin and a slight decline in expenses during the period. The 24Q1 gross margin is 29.98%, +2.56/+6.21pct, respectively. It is expected to be mainly a further strengthening of raw material cost control and scale effects in the industrial sector; the net interest rate is 15.77%, +1.35pct year on year, with sales/management expenses remaining relatively stable, +0.03/-0.06pct year on year, respectively, and the financial expenses ratio is -0.36pct year on year. It is expected to mainly bring more interest income from the increase of 3.16 billion dollars in monetary capital in the 23Q1. It is expected that as channel expansion is further strengthened, the four major BGs will continue to gain strength, and future performance is expected to grow steadily.
Operational capacity improved, and high dividends showed management confidence. ROE for 24Q1 was 4.18%, +0.31pct/+1.82pct compared to the same period in '23 and '22, respectively, the highest value in a single quarter in the past three years. It is expected that ROE will increase further as we continue to focus on the main business and further optimize operating capacity. The number of inventory turnover days was 75 days (year-on-year - 13 days), and inventory management capabilities were significantly improved. Accounts receivable turnover days were 53.5 days (-3.5 days), repayment capacity improved, and operating capacity improved. The 23-year dividend plan confirmed a dividend of $20.77 for every 10 shares. The total cumulative dividend for the five years of 2019-23 exceeded RMB 17.2 billion, accounting for 87.86% of the total net profit attributable to mother. The high dividend strategy shows management's confidence in development.
Catalysts: Continued expansion of online channels and rapid release of core products
Risk warning: Channel expansion falls short of expectations, product sales fall short of expectations