Incidents:
The company released the 2023 Annual Report and the 2024 First Quarter Report. The full year of 2023 achieved operating income of 15.695 billion yuan, up 11.46% year on year, achieving net profit of 3.87 billion yuan, up 21.37% year on year, net profit after deducting non-return to mother net profit of 3.73 billion yuan, up 27.51% year on year; net cash flow from operating activities of 4.827 billion yuan, up 57.86% year on year; basic income per share of 4.36 yuan, up 21.45% year on year; weighted average return on net assets of 29.20%, +1.32 pct year on year; plans to distribute a discovery dividend to all shareholders for every 10 shares 31 yuan (tax included), with a dividend payment rate of 71.41%, and a total dividend of 2,764 billion yuan.
In the first quarter of 2024, the company achieved operating income of 3.803 billion yuan, a year-on-year increase of 14.06%, net profit to mother of 929 million yuan, an increase of 26.27% year-on-year, and net profit after deducting non-return to mother of 818 million yuan, an increase of 26.73% over the previous year.
Investment highlights:
Sales volume and revenue of electrical connection products have grown steadily, and profitability has increased significantly.
Adhering to the position of a “safe electricity expert” in 2023, the company's electric connectivity business continued to promote product renewal around consumer demand and strengthen the new image of bull fashion and high-end brands. It achieved annual revenue of 7.387 billion yuan, an increase of 4.77% year on year, main business cost of 4.367 billion yuan, down 5.81% year on year, gross profit margin of 40.89%, and +6.64 pct year on year. Product side: The converter has completed product series upgrades such as rail sockets, high-value sockets, global travel converters, and Z generation sockets. The launch of new products in response to the pain points of segmented scenarios, data center power distribution, factory production, and the electrician community has further consolidated the company's leading position in the industry. In terms of digital accessories, a series of innovative products have been launched for scenarios such as small-sized sockets, desktop electricity, fast charging, and wireless charging, which greatly enhances the charging experience. Channel side: The company has traditional advantages of offline hardware channels, digital channels, and e-commerce channels. Currently, it has more than 750,000 hardware channel sales points and more than 250,000 digital channel sales points. The extensive layout of terminal outlets can provide consumers with high-quality products and services in a timely and convenient manner.
The smart electrical lighting business has gone through cycles and achieved double-digit revenue growth.
In 2023, the company is committed to building a smart front-mounted electronics ecosystem with smart headlights as the core, including full-house front-end products such as wall switches and sockets, LED lighting, shower bars, circuit breakers, smart door locks, smart clothes dryers, etc., to promote the transformation of the new retail model of offline flagship store+online drainage, meet the needs of consumers for one-stop purchasing+experience, overcome the challenges of deep adjustment in the real estate industry, and achieve continuous growth through the cycle; achieved revenue of 7.902 billion yuan, an increase of 15.37% year-on-year, and a year-on-year increase of 4.283 billion yuan. 7.67%, gross profit margin 45.81%, year-on-year +3.88pct. Product side: Wall switch products are in line with the brand upgrade strategy and consumers' pursuit of home aesthetics, and launched butterfly wing family ultra-thin switches, cream air switch sockets, glass switch sockets, etc. LED lighting products adhere to the “eye friendly” position and carry out technological innovation in the direction of “anti-blue light”, “no video flash”, “full spectrum”, “high CRI”, “anti-glare”, and “comfortable color temperature”. Smart headlamp products operate under both Bull and Muguang brands. 2023 was the year the “Muguang” headless lamp brand started, which attracted widespread attention from the industry. Channel side: Through the company's traditional offline decoration channels and online e-commerce channel sales, the company currently has more than 120,000 decoration channel sales points. The company actively adapts to consumer trends and expands to home improvement companies, etc., vigorously promotes integrated and exclusive upgrading of stores, and better serves the one-stop purchasing needs of the front decoration process.
Vigorously develop the new energy business to achieve rapid growth.
With the accumulation of electricity technology and brand advantages over the years, the new energy business quickly completed the layout of product lines and channels from AC to DC, from slow charging to fast charging, from single pile to group charging, from charging to energy storage, from to C to B, etc., and achieved rapid growth. It achieved annual revenue of 380 million yuan, an increase of 148.64% year on year, and a main business cost of 250 million yuan, up 141.97% year on year, gross profit margin of 34.15%, up 1.82 pct year on year. Product side: The NEV charging gun/pile business revolves around the comprehensive scenario-based charging and discharging experience of electric vehicles, continuously improving product layout, and continuous exploration and personalized innovation. The energy storage business has successively arranged household energy storage for the European market and industrial and commercial energy storage for the domestic market. Channel side: Vigorously expand the domestic offline NEV charging pile market and continue to increase the number and coverage of outlets nationwide. The C-end channel focuses on expanding professional distributors such as NEV auto trade stores, car beauty and decoration stores, etc., and has developed more than 17,000 terminal outlets, and initially built a sales and service network covering urban and rural areas. The B-side channel focuses on customer development covering government institutions, enterprises, properties, charging stations, etc., and has developed more than 1,500 operator customers. At the same time, it has developed strategic cooperation with companies such as Iron Tower Group, State Grid, Geely Remote, and Celis.
The company increased investment in new businesses, markets and products. At the same time, the cost reduction effect was remarkable, and profitability continued to grow.
In 2023, the company's gross margin was 43.20%, +5.20pct year on year; the net margin was 24.62%, +2.00pct year on year, mainly due to continuous optimization in product iteration, procurement cost reduction, and process cost reduction.
In terms of period expenses, the company's expenses rate for the period in 2023 was 14.41%, compared to +1.76pct. Among them, sales, management, R&D, and finance expenses were 6.82%, 3.99%, 4.29%, and -0.69%, respectively, +1.14, +0.43, +0.11, and +0.08pct, respectively. The increase in sales expenses was mainly due to the increase in investment in advertising expenses, business promotion expenses, etc., and the increase in R&D expenses was mainly due to the increase in personnel wages and equity incentive expenses.
Accelerate the promotion of internationalization and fully launch overseas markets.
In 2023, the company established an international division and established overseas subsidiaries such as Germany and Indonesia to accelerate the localization of organizations and teams, quickly integrate internal and external resources, and fully launch overseas markets. In line with the new cycle of development in Southeast Asia and other countries, it took the lead in upgrading the dealer system in major Southeast Asian countries. Through local market research and consumer insight, it planned and launched a variety of innovative localized products around the Southeast Asian market. At the same time, more in-depth research and dealer recruitment for emerging markets such as the Middle East and South America began. Facing the new cycle of new energy development in the European and American markets, the company quickly entered the new energy charging and household energy storage business as the core to achieve layout in terms of products and channels.
Announcing the 2024 Stock Incentive Plan, demonstrating confidence in future development.
The company announced a new round of incentive plans to grant restricted stock incentives to a total of 888 core managers and key personnel. The number of restricted shares to be granted is 2.43 million shares. The condition for lifting the ban is that the operating income or net profit for the year 2024-2026 is not lower than the average of the previous three fiscal years and not less than 110% of the average of the previous two fiscal years.
Covered for the first time, the company was given an “increase in weight” rating.
The company is a leading enterprise in the civil electrical industry. Since its establishment, the company has always been guided by consumer demand, based on product quality. Starting with the “socket” (that is, converter) segment, the company has continuously promoted innovation in function, technology and design, developed a large number of products loved by consumers, and gradually expanded to form the three major business segments of electrical connectivity, smart electrical lighting, and new energy. “Bull” has become a well-known public brand. In the future, the company will continue to accelerate the development of intelligent ecology, new energy electricity and international business, establish “technology-leading, customer-only, digital-intelligence-driven, and global breakthrough” four-wheel drive strategic capabilities, and continue to build a comprehensive competitive advantage. Covered for the first time, the company was given an “increase in weight” rating. It is estimated that in 2024, 2025, and 2026, the company can achieve net profit of 4.478 billion yuan, 5,011 billion yuan, and 5.658 billion yuan respectively, corresponding EPS of 5.02 yuan, 5.62 yuan, and 6.35 yuan respectively. Based on the closing price of 118.12 yuan/share on April 29, the corresponding PE is 23.52 times, 21.01 times, and 18.61 times, respectively.
Risk warning: risk of new business falling short of expectations; risk of channel and market development falling short of expectations; risk of large fluctuations in raw material prices; risk of increased industry competition.