Incident: The company achieved operating income of 15.502 billion yuan for the full year of 2023, +1.16% year on year, net profit to mother of 612 million yuan, -63.96% year on year; of these, 2023Q4 achieved operating income of 4.971 billion yuan, -4.42% year on year, and net profit to mother of 08 billion yuan, -98.54% year on year. The company achieved annual revenue of 3.474 billion yuan in Q1 2024, +7.35% year-on-year, and net profit to mother of 298 million yuan, -8.71% year-on-year.

The company plans to distribute a cash dividend of 3 yuan (tax included) to all shareholders for every 10 shares, with a dividend rate of 27.7%.

Q1 Domestic sales have reached an inflection point, and export sales have maintained relatively rapid growth

The 23A domestic sales growth rate is under pressure, and the overseas growth rate is relatively good. By brand, 23A Covos/Temco brand revenue was -1%/+5% year-on-year. Looking at domestic and foreign sales, domestic/overseas revenue was -11%/+26%; of these, the overseas business revenue of the Covos brand was +20.1%, and the overseas business revenue of the Tianke brand was +40.5%. The company's overseas growth performance is good, and export sales drive revenue growth; domestic sales are under pressure due to fierce competition in the domestic market, and Tianke Brand's offline channel reforms have put pressure on the growth rate. In terms of models, the revenue share of all-purpose products among Covos brand sweepers increased further to 79.9%, +29.2pct compared to the previous year; shipments of all-purpose products reached 1.551 million units, +68.6% over the same period last year. The Temecofman series floor washer products shipped 3.27 million units, +25.4% over the same period last year. Domestic sales were fixed in 24Q1. According to Ovi data, online sales volume of Covos+Tianke was +8.8% year-on-year in 24Q1, and domestic sales data improved.

The profit side has been repaired, and efforts to reduce costs and increase efficiency have been increased

In 2023, the company's gross margin was 47.5%, -4.11pct year on year, and the net profit margin was 3.94%, year-on-year -7.15pct; of these, 2023Q4 gross margin was 46.46%, year-on-year -8.8 pct, and the net margin was 0.16%, -10.92pct year on year.

The company's gross margin for Q1 in 2024 was 47.17%, -3.5pct year on year, and the net margin was 8.58%, or 1.5pct yoy. By product, the gross margin of service robots/smart household appliances was -2.2/-6.64pct year-on-year.

By region, domestic/overseas gross margin was -10.8/+7.16pct year-on-year. The gross margin of export sales increased significantly. The decline in gross margin and net profit margin narrowed month-on-month in 24Q1.

The company's 2023 sales, management, R&D, and financial expense rates were 34.17%, 3.76%, 5.32%, and -0.17%, respectively, +4.01, -0.45, +0.55pct; of these, the 23Q4 quarterly sales, management, R&D, and financial expenses rates were 37.86%, 3.35%, 4.42%, and -0.19%, respectively, +3.79, +0.49 pct. The year-on-year increase in sales expenses was mainly due to increased advertising, marketing and platform service fees.

The company's Q1 sales, management, R&D and financial expense ratios for 2024 were 27.69%, 3.36%, 6.34%, and 0.53%, respectively, -1.63, -1.28, +0.55, and -0.45pct. Sales and management expenses decreased significantly year-on-year, and the results of cost reduction and efficiency were obvious.

Investment advice: Facing the new economic environment and competitive trends at home and abroad in 24 years, the company will continue to promote the growth and share of overseas business on the basis of summarizing operating gains and losses in 2023. While actively reducing costs and increasing efficiency, we are vigorously enriching the main business product matrix and price segment coverage to guide and meet the needs of different consumer groups. On the basis of ensuring leading product technology functions, the overall gross margin level is raised during the average product price reduction cycle through more effective cost reduction measures, and the company's operating performance is significantly improved. According to the company's annual report and quarterly report, we have appropriately lowered the company's sales expenses rate. The estimated net profit for 24-26 is 14/17/20 billion yuan (the value was 1.30/1.66 billion yuan 24-25 years ago), and the corresponding dynamic PE is 20.3x/16.8x/14.3x, maintaining the “buy” rating.

Risk warning: New product sales fall short of expectations, industry competition intensifies, offline channel repairs fall short of expectations, new business profits fall short of expectations, raw material prices fluctuate sharply, etc.