Incident: In 2023, the company's revenue was 4.617 billion yuan, -11% year-on-year, net profit to mother -474 million yuan, -278% year-on-year, net profit without return to mother - 428 million yuan, year-on-year -293%, gross sales margin 22.72%, year-on-year -3 pct, net sales interest rate -10.27%, year-on-year -15 pct, mainly due to centralized downstream channel dewarehousing and higher expense rates. 2024Q1's revenue was 1,636 billion yuan, +5.45%/+42.34%, net profit to mother of 130 million yuan, +48.46% year over month, net loss after net profit not attributable to mother was 132 million yuan, year-on-month +58.49%, month-on-month reverse loss, gross sales margin 30.29%, -3.65/+19.05pct, net sales margin 7.94%, year-on-month +2.30/+34pct. 24Q1 performance greatly exceeded expectations, mainly due to downstream channel inventory replenishment and fee rate decline.
Downstream channel dewarehousing dragged down overall performance in '23, and the 24Q1 performance inflection point has arrived. The company lost a large amount of money in '23. The main reasons include: first, the downstream channel firmly implemented the inventory removal strategy, and the company's revenue growth fell short of expectations; second, the downstream channel's outbound promotion deduction ratio increased dramatically, which had a significant negative impact on the company's gross profit; third, the company's star product “OptiMusZ” commercial lawn mower first launched into the market, invested a lot of resources in R&D and marketing, and failed to scale up the company's profitability in the short term; fourth, the impact of high-priced inventory. The 24Q1 downstream channel entered the inventory replenishment cycle. In addition, the gross margin of the company's new products was high, revenue growth resumed, and the profit margin returned to a reasonable level of 8%.
Commercial lithium battery OPE is expected to develop rapidly, and the large repurchase plan shows confidence in development. Commercial OPE for lithium batteries is expected to rise. The main reasons include: first, the 2024 California OPE fuel ban; second, lithium battery OPE performance is close to fuel OPE; third, lithium battery OPE has lower operating costs and life cycle costs. The company is leading the way in 82V commercial lawnmower products, and has reached a strategic cooperation with STIHL to manufacture such products under its own brand, and shipments are expected to increase rapidly in 24 years. The company plans to buy back 1-2 billion yuan of shares for cancellation, and the chairman plans to increase his shares by 25-50 million yuan, demonstrating confidence in the company's long-term investment value.
Investment advice: Considering strong downstream demand, the company's commercial OPE is leading. We expect the company to achieve net profit of 3.00/5.04/614 million yuan in 2024-2026, +163.3%/+68.0%/+21.8% year-on-year, corresponding EPS of 0.61/1.03/1.25 yuan, maintaining a “buy” rating.
Risk warning: downstream demand falls short of expectations; costs have risen sharply; industry competition has intensified.