The company released its 2024 quarterly report: 2024Q1 achieved revenue of $523 million (+32.3% YoY), net profit to mother of 59 million yuan (+47.2% YoY), and net profit not attributable to mother of 53 million yuan (+54.5% YoY). The OEM business resumed under a low base, the brand continued to grow rapidly, and some orders from 23Q4 were delayed and confirmed in 24Q1. Overall performance achieved impressive results.
Smart toilets continue to grow at a high rate, and OEM and water fittings have steadily recovered. The smart toilet brand business signed Li Xueqin as the spokesperson to convey the consumer philosophy of “understand smart toilets, choose Rielt”, and the brand accelerated its entry into the market. With the volume of new retail channels represented by online Douyin, traffic spills over to traditional e-commerce channels such as Tmall & Jingdong, and stable profits; offline expansion of specialty stores, expansion of door-to-door market share, etc., and new home appliance channels are entering new channels, and channel expansion is speeding up. The Q1 smart toilet brand business is expected to more than double, and its share is increasing at an accelerated pace. In terms of foundry, it is expected that 24Q1 water fittings will continue to pick up, achieve good growth under a low base, and continue to perform steadily in smart toilet foundry.
The transformation of branding has driven a steady increase in profit margins. The gross margin of the 24Q1 company was 30.24%, +5.01% year over year. The increase in the share of high-margin brand business led to an increase in gross margin. The 24Q1 sales/management/R&D/finance cost rates were 11.66%/4.35%/4.26%/-0.82%, respectively, compared with +5.84pct/-1.67pct/-0.07pct. The increase in sales expenses was mainly due to increased product promotion expenses (such as contract spokespersons, annual product savings promotion subsidies, etc.), and the management fee rate was reduced due to scale effects. The net profit margin of the 24Q1 company was 11.19%, +1.13pct compared to the previous year. The company's profit margin increased steadily under the brand transformation.
Contract liabilities are impressive, and receivables turnover is accelerating. The 24Q1 net operating cash inflow of the 24Q1 company was 38 million yuan, +0.07 billion yuan year on year, and contract liabilities at the end of the period were 108 million yuan, or +31 million yuan year on year. In terms of operating capacity, as of 24Q1, the company's accounts receivable turnover days was 58 days, year-on-year - 37 days; accounts payable turnover days were 68 days, year-on-year - 8 days, and inventory turnover days was 93 days, which was basically the same as the previous year.
Profit prediction and investment rating: The company accelerates smart toilet brand building and omni-channel layout. Overseas OEM accelerates along with the development of new customers, and domestic brands drive growth with overseas foundries. We expect the company's net profit to be 270 million yuan, 340 million yuan, and 410 million yuan respectively in 2024-2026, corresponding PE is 18.3X, 14.8X, and 12.3X, maintaining a “buy” rating.
Risk warning: Competition in the industry has intensified, the decline in real estate has exceeded expectations, and the price of raw materials has risen above expectations.