Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 3.15 billion yuan, a year-on-year decrease of 4.6%; realized net profit of 110 million yuan, a year-on-year decrease of 42.9%; and realized deduction of 100 million yuan in non-net profit, a year-on-year decrease of 44.4%. Looking at a single quarter, Q4 achieved revenue of 800 million yuan, a year-on-year decrease of 12.2%; realized net profit of 0.1 billion yuan, a year-on-year decrease of 90.4%; and realized net profit of 100 million yuan after deduction, which was the same as the previous year. In 2023, the company's cash dividend was 46.156 million yuan, and the performance dividend rate reached 42.5%.
In 2024, Q1 achieved revenue of 720 million yuan, up 7.7% year on year; realized net profit of 0.2 billion yuan, up 0.5% year on year; realized deducted non-net profit of 0.2 billion yuan, up 0.3% year on year.
Water health products are growing rapidly, and the two brands are expanding their channels overseas. By product, the company achieved revenue of 1.39 billion yuan/1.16 billion yuan/580 million yuan respectively in 2023, with year-on-year revenue of -10.2%/+10.3%/-1.4%, of which the core industry Philips Water Health achieved good growth; by region, domestic and foreign sales achieved revenue of 2.57 billion yuan/580 million yuan, respectively, -10.1%/+29.8% year-on-year, respectively. Overseas markets mainly relied on Delmar and Philips brands for channel expansion to drive revenue growth; by sales model, online Revenue of 1.63 billion yuan/1.53 billion yuan was achieved respectively, -10.9%/3.1% year-on-year, respectively.
Competition for e-commerce traffic has intensified, hampering profitability. The company's gross margin in 2023 increased by 1.3 pp to 30.8% year on year, with gross margin of home environment/water health/personal health care increased 25.4%/37.6%/30.7%, respectively, and +1.9pp/ +2pp/ -5.1pp, respectively. The gross margin of the popular personal care and health products launched by the company in 2023 was low, lowering the gross margin level of personal care and health; by sales model, the gross margin of online and offline gross margin was 37.9%/23.1%, respectively, 1.4+pp/+2.3pp, respectively; in terms of cost ratio, the 2023 company Sales/management/finance/R&D expenses were 19.3%/4.5%/-0.9%/4.8%, respectively, +3.8pp/ +0.4pp/ -0.7pp/+1.1pp. Sales expenses increased due to increased e-commerce platform traffic competition and the company increased marketing and promotion efforts, which dragged down the company's profit level. The company's net interest rate decreased by 2.3 pp to 3.3% year on year.
Profitability remained stable in 24Q1. The company's Q1 gross margin increased 1.4pp to 30.9% year-on-year in 2024.
In terms of cost ratio, the company's sales/management/ financial/ R&D expenses rate in 2023 was 18.9%/4.7%/-0.9%/5.3%, respectively, +2.5pp/ -0.2pp/ -0.8pp/+0.7pp, respectively. Looking at net interest rates, the company's net interest rate increased by 0.1pp to 3.3% year-on-year in Q1 in 2024.
Profit forecasting and investment advice. Relying on a dual brand strategy, the company continues to explore a multi-category layout, launch a variety of popular products in 2023, and continue to promote new products to stimulate demand and explore overseas markets in 2024. The company's 2024-2026 EPS is expected to be 0.37 yuan, 0.47 yuan, and 0.51 yuan respectively, maintaining a “holding” rating.
Risk warning: Risks such as export sales growth falling short of expectations, falling short of expectations in new product releases, and increased competition.