Core views:
The company discloses its 2023 annual report. In 2023, we achieved revenue of 3.15 billion yuan (YoY -4.6%), net profit to mother of 110 million yuan (YoY -42.9%), gross profit margin of 30.8% (YoY+1.3pct), and net profit margin of 3.4% (YoY-2.3pct). 23Q4 achieved revenue of 800 million yuan (YoY -12.2%), net profit to mother of 0.1 billion yuan (YoY -90.4%), gross profit margin of 30.1% (YoY+0.8pct), and net profit margin of 1.0% (YoY-8.2pct).
The decline in revenue is mainly due to pressure on industry demand and business adjustments. Home environment, water health, personal care and sanitary ware achieved annual revenue of 13.9, 11.6, 5.8 billion yuan, and 0.04 billion yuan, respectively, -10%, -1%, and -96% compared with the same period last year. The decline in the home environment business is expected to be mainly for the Del Mar brand to refocus on the cleaning circuit, leading to a decline in revenue from kitchen and household appliances. The lifestyle and bathroom business declined sharply, mainly due to the company reducing investment in non-core categories of brands such as Vantage. It was basically divested in 2023. If the impact of this business were excluded, the overall revenue for the whole year was -1.7% compared to the same period last year.
The company disclosed its 2024 quarterly report. 24Q1 achieved revenue of 720 million yuan (YoY +7.7%), net profit to mother of 0.2 billion yuan (YoY +0.5%), gross profit margin of 30.9% (YoY+1.4pct), net profit margin of 3.3% (YoY+0.2pct), gross margin improved year on month. The share of high-margin vacuum cleaners and water health products is expected to increase. Recently, the export performance of the home appliance industry is stronger than domestic sales. The share of the company's export revenue with a relatively high gross margin is also expected to increase. Net interest rates declined year-on-year but have begun to improve month-on-month. It is expected that investment strategies for emerging e-commerce have been optimized. The lower financial expense ratio is expected to result in exchange gains brought about by the devaluation of RMB. 24Q1 companies' sales/management/R&D/finance expense ratios were +2.5pct/-0.2pct/+0.7pct/-0.8pct, respectively.
Profit forecast and investment advice: The company is expected to achieve net profit of 1.9, 220 million yuan, and 250 million yuan in 24-26, +75%, +14% year-on-year, respectively. Considering the diversification of the company's business and future growth, a 24-year PE 28x, corresponding to a reasonable value of 11.52 yuan/share, was given a “holding” rating.
Risk warning: Industry competition intensifies, raw material costs rise, and the expansion of emerging channels falls short of expectations.