Incident: 2024Q1 achieved operating income of 364 million yuan, -11.22% year-on-year, and net profit to mother of -204 million yuan, -124.28% year-on-year.

The company's revenue growth rate is under pressure, mainly due to the year-on-year decline in vacuum cleaner OEM business orders.

2024Q1's gross margin was 10.2%, -3.56pct year on year, and the net margin was -1.11%, -6.05pct year on year.

The quarterly sales, management, R&D, and financial expense ratios of 2024Q1 were 1.36%, 7.06%, 4.02%, and -0.33%, respectively, -0.13, +1.52, +0.94, and +0.33pct year-on-year. The company's net profit declined sharply year-on-year, mainly due to a decrease in the company's vacuum cleaner OEM business orders and a decline in gross profit.

On the balance sheet side, the company's 2024Q1 monetary capital+transactional financial assets were $538 million, 7.13% year over year, inventory was 285 million yuan, +5.5% year over year. The total amount of notes receivable and accounts receivable was 451 million yuan, -19.06% year over year. On the turnover side, the company's 2024Q1 inventory, accounts receivable, and accounts payable turnover days were 76.03, 121.75, and 111.83 days, respectively, +3.67, +5.58, and -42.4 days. On the cash flow side, the net cash flow from 2024Q1's operating activities was 74 million yuan, and 23Q1 was -016 million yuan, of which 209 million yuan was cash from purchasing goods and receiving labor payments, or -7.1% over the same period last year.

Investment advice: Due to the fierce competitive environment, the company's OEM business is under pressure. The company currently lays out the upstream industry around its core business, and has also completed the transformation of the customer structure. In the future, as the self-control rate increases, the company's profit level is expected to improve. According to the company's quarterly report, we slightly lowered our revenue growth rate. We expect net profit to be 0.5/0.7/100 million yuan (previous value 0.7/0.9/120 million yuan) in 24-26, corresponding to dynamic PE 39.1x/27.8x/21.1x, maintaining the “increase in holdings” rating.

Risk warning: raw material price fluctuation risk; market competition risk; alternative product risk; machine order falling short of expectations; exchange rate risk; OEM penetration rate falling short of expectations, etc.