Incidents:
Bull Group released its 23rd annual report and its quarterly report for '24: In '23, it achieved revenue of 15.695 billion yuan, +11.46% year on year, net profit of 3.70 billion yuan, +21.37% year on year, after deducting non-net profit of 3.03 billion yuan, +27.51% year on year; in the fourth quarter, revenue of 4,088 billion yuan, +13.34% year on year, net profit of 1.07 billion yuan, +36.45% year on year. The proposed dividend in '23 is 2,764 billion, with a dividend rate of 71.41%. In the first quarter of '24, we achieved revenue of 3.803 billion yuan, and net profit to mother of 929 million yuan, +26.27% year-on-year, after deducting non-net profit of 818 million yuan, +26.73% year-on-year.
Comprehensive strength has been steadily improved, and new business increases have been realized as scheduled
Since 23Q2, the company's revenue has maintained double-digit growth and excellent performance; on the one hand, the comprehensive strength of traditional business has continued to be strengthened, and the operation cycle has passed; on the other hand, it has benefited from new business growth as scheduled. In '23, revenue from the electricity connection business was +5%, driven significantly by high-value new products; revenue from the smart electrical lighting business was +15%. With the integration and upgrading of original decoration channels, the construction of new product channels without main lights progressed. Wall opening and LED lighting are expected to achieve double-digit growth, and the smart ecology category grew even more prominent; in addition, revenue from the new energy business was +149% to 380 million. In 24Q1, all three business segments continued their steady growth trend.
Gross margin continued to improve significantly, and annual net margin reached a record high
In '23, the company's net interest rate reached a record high of +2.0pct, a record high. It mainly benefited from a sharp increase of +5.2 pct in gross margin. On the one hand, the company continued to reduce internal costs and increase efficiency, reducing costs in various business operations and procurement; on the other hand, raw material cost dividends helped. At the cost ratio level, sales/management/R&D increased slightly in 23 years due to increased business investment, with a year-on-year increase of +1.1, +0.4, and +0.1 pct, respectively.
The profitability of the 24Q1 company continued to increase, with a net margin of +2.4 pct year over year; gross margin of +5.0 pct during the period, which has not yet been affected by copper prices; sales/management/R&D were +1.0, +0.2, and +0.7 pct, respectively.
Introduce incentive programs on a rolling basis to ensure employee positivity and stability
The company launched two incentive plans on a rolling basis, continuing the characteristics of previous incentive plans, with wide coverage and unaggressive goal setting to ensure employee motivation and stability. ① Following 2020, the 2024 Special Talent Stock Ownership Plan was launched, covering some directors and supervisors. The stock source was repurchase, and the 24-27 year operation was assessed; ② A 24-year restricted stock incentive was rolled out on a rolling basis, covering the core backbone. The stock source was repurchases, and the price was 53.74 yuan, and the assessment was 24 to 26 years of operation. The incentive assessment condition is that the annual revenue or net profit growth is not lower than the average of the previous three years and not less than 110% of the average of the previous two years.
Operating & dividends showed a steady undertone, giving the “buy” rating Bulls performed excellently in their 23 annual reports and 24 quarterly reports. The double-digit revenue growth continued to reflect the company's strong comprehensive strength, and improved profits drove performance beyond market expectations. We expect the company's 24-25 revenue to be 18.047 billion, 20.698 billion, +14.69%, and net profit to mother of 43.24 billion yuan and 4.916 billion yuan, respectively, +11.72% and +13.70%, EPS 4.85 and 5.51 yuan, respectively, and a CAGR of 12.96% for 23-26 years; give the company a 24-year 25X target price of 121.25 yuan, giving it a “buy” rating.
Risk warning: 1) Demand falls far short of expectations; 2) Prices of raw materials fluctuate greatly.