Performance summary: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1.69 billion yuan, +22.2% year on year; realized net profit of 330 million yuan, +49.7% year on year; realized deduction of non-net profit of 320 million yuan, +46.2% year on year. Looking at a single quarter, 2023Q4 achieved revenue of 570 million yuan, +53% year on year; realized net profit of 90 million yuan, +92.1% year over year; realized net profit of 90 million yuan after deduction, +110.1% year over year. 2024Q1 achieved revenue of 290 million yuan, +5.7% year on year; realized net profit of 60 million yuan, +15.1% year over year; realized net profit of 60 million yuan after deduction, +15.8% year on year.
The results of reducing costs and increasing efficiency are obvious, and gross margin has increased markedly. The company's overall gross margin in 2023 was 51.4%, +5pp year on year. Thanks to the optimization of the company's product structure and continuous promotion of cost reduction and efficiency measures, gross margin increased year on year. By product, the gross margin of the company's smart home products in 2023 was 53.1% (+4.8pp), the gross margin of clothes hanger products was 44.0% (+6.6pp), and the gross margin of other products was 18.1% (-14.4pp).
By sales model, the gross margin under the online/offline sales model was 53.9% (+5.6pp)/47.7% (+5.1pp), respectively. In terms of cost ratio, the company's total cost ratio was 28.2%, +1.3pp. Among them, the sales expense rate/management expense rate/finance expense ratio were 20.3%/5.2%/-0.5%/3.1%, and +1.7pp/-0.4pp/+0.1pp/0pp, respectively. The sales expense ratio increased, mainly due to increased promotion of offline channels and e-commerce platforms within 23 years, and increased investment in advertising and promotion. Taken together, the company's net interest rate was 19.4%, +3.6pp year-on-year. Furthermore, the company's net operating cash flow in 2023 was $500 million, +287% year over year, improving cash flow. The gross margin for 24Q1 was 51.9%, +6.2pp; the total cost ratio was 31.5%, +3.9pp, of which sales/management/ financial/ R&D expense ratios were +3.1 pp/ +0.4 pp/ -0.2 pp/+0.6 pp, respectively; the net margin was 19%, +1.5pp, and profitability continued to improve.
Smart home products have maintained rapid growth, and there is still room for further improvement in the category penetration rate. By product, smart home business revenue reached 1.43 billion yuan in 2023, +26.4% over the same period. The company continued to optimize its product structure. With the further popularity of smart clothes dryers and smart door locks, and the company's timely launch of new products that meet market needs, smart home product revenue grew rapidly. Clothes rack product revenue was 220 million yuan, +1.6% year-on-year. In terms of product development, in 2023, the company independently developed the Blue Whale power system for clothes dryers and fully industrialized it to achieve leading load bearing parameters in the industry. Furthermore, the company has continuously developed industry-leading technologies such as intelligent travel adaptation, gesture sensing, and sunlight tracking and drying, and has achieved breakthroughs in many key technical fields including sterilization and disinfection, intelligent interaction, and human body sensing, maintaining the industry's leading edge in technology and continuously improving product competitiveness. In 2024, the company will continue to strengthen the high-end brand image of Good Wife, shape the brand power with explosive products, and consolidate the leading brand recognition in the drying category.
Online and offline dual-drive development to continuously improve channel management efficiency. By channel, the company's offline/online channel revenue in 2023 was 6.7/1.01 billion yuan, +37.5%/+13.7% year-on-year, accounting for 39.8%/60.2% of revenue. In terms of offline channels, the company is speeding up channel sinking, deepening the layout of new channels such as hardware stores, new retail, and KA; at the same time, it also deeply empowers dealers, deepens their understanding of the company's product concept and development strategy, and continuously strengthens the overall operating capabilities of dealers. In terms of online channels, the company maintains the steady growth of existing platforms through global integration and rapidly lays out new e-commerce sales platforms. In 2024, the company will continue to further cultivate the sales network and deepen the management of a full-link, accurate and efficient three-dimensional channel system.
Profit forecasting and investment advice. EPS is expected to be 0.99 yuan, 1.19 yuan, and 1.40 yuan respectively in 2024-2026, and corresponding PE is 15 times, 12 times, and 11 times, respectively. Considering that the company's share of the smart home category continues to rise, online and offline channels go hand in hand, and there is still room for expansion, maintaining a “holding” rating.
Risk warning: the risk of increased competition in the industry, the risk of large fluctuations in raw material prices, the risk of new product launches falling short of expectations, and the risk that the pace of channel expansion falls short of expectations.