Profitability continues to increase, and the 2023 dividend rate is close to 6%. In 2023, the company achieved revenue of 205.02 billion/+7.8%, net profit due to mother of 29.02 billion/+18.4%, net profit not returned to mother of 27.57 billion/+14.9%.
Among them, Q4 revenue was 49.21 billion/+17.7%, net profit attributable to mother was 8.93 billion/+43.9%, and net profit not attributable to mother was 8.35 billion/+54.1%. 2024Q1 achieved revenue of 36.6 billion/ +2.5%, net profit attributable to mother of 4.68 billion/ +13.8%, net profit not attributable to mother of 4.53 billion/+21.5%. The company plans to pay a cash dividend of 23.8 yuan for every 10 shares, with a cash dividend rate of 45.3%, and a dividend rate of 5.9% corresponding to the closing price on April 29.
The air conditioning industry is operating at a high level, and Gree's air conditioning revenue increased by 12%. According to industry online data, in 2023, China's air conditioning sales increased 11.2% year on year, with domestic sales increasing 13.8% and export sales increasing 7.8%; 2024Q1 air conditioner sales increased 20.3% year on year, domestic and foreign sales were +18.8%/+21.8% respectively, and air conditioning maintained a high level of prosperity. Gree's air conditioning business revenue in 2023 increased 12.1% year-on-year to 151.2 billion, with H1/H2 +1.8%/+22.8% respectively. Looking at domestic and foreign sales, the company's domestic sales revenue increased by 15.2% in 2023, and export revenue increased by 7.0%. The domestic sales performance of Gree Air Conditioning is expected to be relatively good.
Emerging businesses achieved higher growth. In 2023, the company's industrial product revenue increased by 31.6% to 10 billion yuan, green energy revenue increased by 51.2% to 7.1 billion, household appliances revenue fell 12.4% to 4 billion, intelligent equipment revenue increased 55.0% to 700 million yuan, and the company's industrial manufacturing and green energy business achieved high growth.
Gross profit margins continued to rise, and profits continued to improve. The company's gross margin in 2023 was +4.5pct to 30.6%, of which the gross margin of the air conditioning business was +4.6pct to 37.0%, and the 2024Q1 gross margin was +2.0pct to 29.5%. It is expected mainly due to improved raw material costs and channel structure optimization. The company's investment in sales expenses has increased. In 2023, the sales/management/R&D/finance expenses ratio was +2.4/+0.4/flat /-0.6 pct to 8.4%/3.2%/3.3%/-1.7%, respectively, and 2024Q1 remained flat /+0.7/-0.2/-1.0pct year over year, respectively.
In 2023, the company's net profit margin was +1.3pct to 14.2%, and Q1 net profit margin was +1.3pct to 12.8%.
Contract debt remained high, and $3 billion was invested to start a trade-in. The company's 2024Q1 contract debt reached 20.5 billion, an increase of 51% over the previous quarter. It is second only to 2023 in terms of contract debt in the first quarter of previous years. It is expected that terminal channel preparation enthusiasm is still high. In April, the company announced that it will invest 3 billion yuan to launch trade-in activities for home appliances, and provide subsidies ranging from 220 to 1,000 yuan for hanging machines and cabinets, which is expected to fully stimulate consumer demand for replacement. The company's subsequent growth momentum is still sufficient.
Risk warning: industry competition has intensified; raw material prices have risen sharply; channel reform has fallen short of expectations.
Investment advice: Adjust profit forecasts to maintain a “buy” rating.
The company's leading edge in the main air conditioning industry is stable. Considering that various regions are currently actively promoting the trade-in of home appliances and the company is taking the lead in responding, the flexibility brought about by the demand for air conditioning upgrades is worth looking forward to. After adjusting the profit forecast, net profit for 2024-2026 is expected to be 323/347/36.8 billion (previous value: 300/320/- billion), up 11%/7%/6% year over year, corresponding to PE = 7/7/6x, maintaining the “buy” rating.