Core views
Revenue and net profit to mother were +11.5% and +3.59% year-on-year. Independent brands continued to expand, overseas business was under pressure, and gradually recovered from 23Q4. The 24Q1 company's revenue is +32.3%, and the net profit margin for 24Q1 is expected to increase 150% + year-on-year, and the net profit for 24Q1 is +47.2% year-on-year. Thanks to improved profitability brought about by the increase in the share of independent brands, 24Q1 gross profit margin is 30.2% /+5.0 pct, and 24Q1 net interest rate is 11.3% /+1.2pct. Follow-up attention: 1) The independent brand business is expected to continue to expand, and the cost rate is expected to increase under brand building; 2) the smart foundry business is expected to grow at an accelerated pace as new customers are developed; 3) traditional water parts will gradually resume.
occurrences
The company released its 2024 quarterly report: 24Q1 revenue of 523 million yuan/ +32.3%, net profit of 59 million yuan/ +47.2%, net profit of 53 million yuan/ +54.5%; net cash flow from operating activities of 38.3779 million yuan/ +22%, EPS (basic) of 0.14 yuan/share, ROE weighted 2.78% /+0.74pct.
The company released its 2023 annual report: 2023 revenue of 2.84 billion yuan/ +11.5%, net profit of 219 million yuan/ +3.59%, net profit of non-return to mother of 200 million yuan/ +3.83%; net cash flow from operating activities of 436 million yuan/ +20.08%, EPS (basic) of 0.53 yuan/share, +3.92% year-on-year, with ROE weighted 10.97%/-0.47pct. The company plans to pay a cash dividend of 2.5 yuan (tax included) for every 10 shares.
Brief review
24Q1 saw a strong increase in revenue and performance. The 24Q1 company's revenue is 523 million yuan/ +32.3%, mainly due to the company's continued expansion of its own brands and the gradual recovery of overseas orders. It is expected that its own brand revenue will increase 150% + year over year, and the flush component foundry business will grow by double digits. Net profit for 24Q1 and net profit without return to mother were +47.2% and +54.5%, respectively, mainly due to improved profitability brought about by the increase in the share of independent brands. Among them, 24Q1 gross profit margin was 30.2% /+5.0 pct, 24Q1 net profit margin was 11.3% /+1.2pct, and +4.5pct month-on-month.
24Q1 The company's sales expenses ratio was 11.7% /+5.9pct, -6.2pct month-on-month, mainly due to independent brand building and increased expenditure.
In 2023, independent brands continued to expand, and overseas business was under pressure, gradually recovering from 23Q4. The company's revenue and net profit to mother in '23 were +11.5% and +3.59%, respectively. By product, the company's revenue for water tanks and accessories, smart toilets and covers, and same-floor drainage system products in '23 was 6.2, 12.7 million yuan, and 210 million yuan, compared with -13.7%, +25.9%, and +17.7%, respectively.
Among them, the revenue pressure on water tanks and accessories was mainly due to overseas customers leaving warehouses, and the decline from 23Q4 was narrowing; the high increase in revenue from smart toilets and covers was mainly due to the rapid growth of the company's own brand business. The company continued to promote channel development, and it is expected that its own brands will continue to grow 100% + in 23 years. The gross margin of the company's smart toilet, cover, water tank and accessories business in '23 was 30.1% /+6.5pct, 25.8% /+1.4pct, respectively. By region, the company's domestic and overseas revenue in '23 was 1,649 million yuan/ +17.3%, and 536 million yuan/ -3.23%.
The increase in the share of independent brands led to an increase in gross margin, and the company increased marketing investment to help build the brand. The company's gross profit margin in 2023 was 29.53% /+4.72pct, mainly due to the increase in the share of the company's own brands and the decline in raw material costs. In 23, the company's sales, management, R&D, financial expenses ratio was 10.9%, 4.6%, 4.2%, -1.0%, +1.0%, +4.6, -0.2, -0.1, and +1.3 pct. The increase in sales expenses was due to an increase in brand promotion expenses. The financial expense ratio was mainly affected by the year-on-year decrease in exchange earnings. The company's net operating cash flow in '23 was 436 million yuan/ +20.1%. In 24Q1, the company's sales, management and R&D expenses ratio was 11.7%, 4.4%, and 4.3%, +5.8, -1.7, and +0.1pct year-on-year, respectively.
Looking ahead to 2024, it is expected that the own-brand business will continue to expand, smart foundry will accelerate, and traditional water parts will gradually recover. 1) Independent brands: The company is deeply involved in the domestic intelligent bathroom space product market, and will expand its differentiated competitive advantage based on superior products such as smart toilets. It is expected that the offline channel layout will continue to increase in 2024, with retail distribution and home appliance channels expected to expand; 2) Smart foundry: the company's smart toilet foundry business accounts for a relatively high proportion of domestic and foreign customers. Since 24 years, the company has accelerated the development of the international market. It is expected that new customers will drive the accelerated growth of the foundry business; 3) Traditional flush water fittings: it is expected that domestic and foreign customer demand will drive the rapid growth of plumbing parts in 24 years Business revenue recovery.
Investment recommendations: The estimated revenue for 2024-2026 is 26.9 billion yuan, 32.5, and 3.86 billion yuan, up 23.2%, 20.8%; net profit to mother is 2.68, 3.30, 396 million yuan, up 22.6%, 23.3%, and 19.8%. Corresponding PE is 18.7x, 15.2x, and 12.7x, maintaining the “buy” rating.
Risk warning: 1) Competition in the smart toilet industry intensifies risks: As regulation of the real estate industry continues and environmental standards become stricter, market competition will further intensify, and the industry will usher in a round of reshuffle. If the company cannot maintain its current competitive advantage in new product development and iteration, production capacity scale, brand building, channel layout, green manufacturing, etc., it will adversely affect the company's production, sales and profit level; 2) Overseas customer demand falls short of expectations: the company is the third largest overseas flush component business, and the pressure on the traditional flushing components business is mainly affected by overseas inventory removal. If the overall recovery in overseas customer demand weakens or orders decrease, it will directly affect the company's revenue.
3) Risk of fluctuations in the real estate market: The company is a post-real estate industry chain company and is closely related to data such as real estate completion and sales. Among them, the bulk business is directly affected by the commencement of construction of hardcover housing, etc., and the retail side business is affected by new home purchases and second-hand housing transactions. If real estate sales continue to decline, it may have an impact on market demand.
4) Risk that independent brand expansion will fall short of expectations: The company will start developing its own brand in 2021. If the expansion of its own brand falls short of expectations, gross margin falls, or the risk of a decline in the company's performance.