Incident: Boss Electric announced its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 11.20 billion yuan, YoY +9.1%; realized net profit to mother of 1.73 billion yuan, YoY +10.2%. In the 2023Q4 quarter, revenue of 3.27 billion yuan was achieved, YoY +7.7%; net profit to mother was 360 million yuan, YoY +6.2%. 2024Q1 achieved revenue of 2.24 billion yuan, YoY +2.8%; realized net profit to mother of 400 million yuan, YoY +2.5%. Q1 The company has been operating steadily and sales have increased.
Q1 Revenue increased slightly: According to the company's announcement, the company's 2023s sales/direct/engineering sales model revenue YoY +19%/+9%/+1%, respectively. We judge that the company's main sales channel situation in 2024Q1 is: 1) The company continues to expand new channels, and Q1 offline retail channel revenue achieved a year-on-year increase of about double digits; 2) According to Aowei Cloud Network data, the boss 2024Q1 online range hood sales YoY +9%. We judge that the company's e-commerce channel revenue increased slightly year on year; 3) According to data from the Bureau of Statistics, the country's completed residential area fell 23% year on year in January-March. Affected by the decline in completion, we judge that the boss's Q1 project channel revenue fell nearly 10% year on year.
We believe that the boss, as a kitchen appliance leader, continues to explore existing markets such as remodeling old kitchens, and is expected to achieve steady growth even when the real estate market fluctuates.
New kitchen appliances maintain high growth: According to the company's announcement, the company's dishwasher revenue growth rate in 2023 is estimated to be 28%, which is faster than the overall revenue growth rate. At the same time, the company actively lays out integrated stove products, and the revenue growth rate of integrated stoves in 2023 is 21%. We believe that Boss Electric continues to make efforts in various categories such as dishwashers and integrated stoves, and revenue is expected to maintain rapid growth (see the in-depth report “A Year of Change, Re-Examining the Boss's “Fickleness”” and the report “Laying Out New Products, “Defending” to “Offensive”).
The difference between Q1 gross margin and sales expense ratio remained the same year on year: According to the company announcement, the difference between gross margin and sales expenses ratio of the 2024Q1 company was +0.0pct year on year, and the decline in gross sales margin narrowed month-on-month. We believe that the company continues to optimize its product structure and improve operational efficiency, and its profitability is expected to continue to improve in the future.
Operating cash flow declined in Q1: According to the company announcement, 2024Q1's net operating cash flow decreased by 130 million yuan year-on-year. We believe that the boss's operating cash flow has declined, mainly due to an increase in raw material preparation in Q1 this year, and cash from purchasing goods and receiving labor payments increased by 110 million yuan over the same period last year.
The level of dividends has been raised, and the incentive mechanism has been further improved. The company plans to pay a cash dividend of 5 yuan (tax included) for every 10 shares, totaling about 470 million yuan. In addition to the company's previous special dividend of about 470 million yuan, the corresponding dividend rate for the total annual dividend is about 54%. The company announced a shareholder return plan for 2024 to 2026. In principle, dividends are paid twice a year, and the annual cash dividend ratio is not less than 50% of the net profit returned to mother for the year. The company also announced two incentive plans:
1) The second phase of the draft business partner shareholding plan is the incentive target for the company's core management; 2) the 2024 draft stock options incentive plan targets 341 middle management and core technical (business) executives. Both incentive plans assessed the revenue for the three fiscal years 2024-2026. The target compound growth rate of annual revenue compared to 2023 revenue is 10%, and the trigger value is 5%.
Investment advice: As a high-end kitchen appliance leader, Boss Electric is good at responding to changes in market demand and adjusting its own product and channel business strategies in a timely manner. We believe that this excellent ability to manage changes is the foundation for the steady growth of the company's performance. We expect Bosang Electric's EPS from 2024 to 2025 to be 1.95/2.17 yuan respectively, maintaining a buy-A investment rating. The target price for 6 months is 29.25 yuan, which corresponds to a 15 times dynamic price-earnings ratio in 2024.
Risk warning: Real estate sales have declined sharply, and the market acceptance of new embedded products is low