The 2023 results and 1Q24 results are in line with our expectations
In 2023, the company achieved revenue of 2,693 billion yuan, -1.9% year on year; net profit to mother was 261 million yuan, -24.7% year on year; net profit after deducting non-return to mother was 255 million yuan, -25.7% year over year. Corresponding to 4Q23, the company achieved revenue of 792 million yuan, +5.7% year on year; net profit to mother of 66 million yuan, -9.5% year over year; net profit after deducting non-return to mother of 67 million yuan, -10.0% year on year. The company announced the year-end profit distribution plan and plans to distribute a cash dividend of 2.9 yuan for every 10 shares, corresponding to a cash dividend rate of 64.2%. The 1Q24 company achieved revenue of 425 million yuan, +1.9% year on year; net profit to mother of 49 million yuan, +94.7% year on year; net profit after deducting non-return to mother of 48 million yuan, +107.8% year on year. The company's performance was in line with our expectations.
Affected by scattered orders from major customers and increased competition, the main business revenue declined: 1) The company's export revenue in 2023 was -15.4% YoY, while Wireless/wired vacuum cleaner revenue was -14.9%/-9.5% YoY respectively. The company's sales volume of wireless/wired vacuum cleaners in 2023 was +14.6%/+15.8% year-on-year, respectively. The decline in revenue was mainly due to external competition, and the average price fell sharply. Furthermore, the company is under pressure to obtain new orders.
2) In 2023, the company's sales revenue for the largest customer, SharkNinja (SN.US), was 1.907 billion yuan, -15.5% year-on-year; SN revenue accounted for -11ppt to 70.8% year-on-year. 3) SharkNinja continues to strengthen cost control and suppress supplier purchase prices. In 2023, SN gross margin was +6.9ppt to 44.9% year over year. We expect the trend of increased competition on vacuum cleaner foundry tracks to continue.
Financial analysis: 1) In 2023, the company's gross profit margin was 20.2%, which was basically the same year on year; 1Q24 gross profit margin was 20.5%, +3.5ppt year on year, recovering from a low base. 2) The company's exchange revenue in 2023 was 13.23 million yuan, -78% year-on-year, resulting in a year-on-year financial expense ratio of -1.2ppt. 3) In 2023, the company's sales/management/R&D expenses remained flat year-on-year, and +0.7pp/ +0.1ppt to 0.5%/3.7%/3.8%, respectively, and consultancy fees increased. Under the combined influence, the company's net interest rate to mother was 9.7% in 2023, -2.9ppt year over year. 4) The 1Q24 company's net interest rate due to mother is 11.6%, which is affected by factors such as government subsidies.
Development trends
The new business is still in the development stage: 1) The company is actively developing domestic customers. Domestic sales revenue in 2023 was +76.1% year-on-year; domestic sales revenue accounted for +11.5ppt to 25.9% year-on-year. Among them, the robot vacuum business achieved revenue of 59.53 million yuan, with annual sales volume of 56,700 units. 2) The energy storage company Xihe Future, in which the company participated in the investment, completed the first order shipment in February 2023. In 2023, the company's energy storage products achieved revenue of 290 million yuan and a gross profit margin of 10.3%. 3) The company's commercial beauty equipment products have been officially introduced into mass production; pet hair clippers, outdoor tool wireless leaf blowers, and fabric cleaners have all been mass-produced.
Profit forecasting and valuation
We kept our 2024 profit forecast basically unchanged and introduced a profit forecast of 326 million yuan for 2025. The current stock price corresponds to the 2024/2025 price-earnings ratio of 27.8x/ 25.8x. Maintain outperforming industry ratings. Due to the increase in the valuation center of the industry, we raised our target price by 15% to 17.20 yuan, which corresponds to 31.9 times the price-earnings ratio of 2024 and 29.7 times the price-earnings ratio of 2025. There is 15% room for growth compared to the current stock price.
risks
Market demand fluctuation risk, competition risk, risk of new business falling short of expectations, exchange rate risk.