Revenue continued to grow at a relatively rapid pace, and Q1 deduction for nonprofit improved markedly. In 2023, the company achieved revenue of 14.65 billion/+6.9%, net profit attributable to mother of 980 million/ +1.6%, and net profit of 1.10 billion yuan/ -0.5% after deducting non-return to mother. Among them, Q4 revenue was $3.89 billion/+30.7%, net profit attributable to mother was 240 million/ +105.1%, and net profit not attributable to mother was 190 million/ +180.7%. 2024Q1 achieved revenue of 3.47 billion/+22.8%, net profit attributable to mother of 170 million/ +24.7%, net profit of 210 million/ +131.8% after deducting non-attributable net profit. The company plans to pay a cash dividend of 4 yuan for every 10 shares, with a cash dividend rate of 33.5%. 2024Q1 Non-recurring profit and loss is mainly affected by forward foreign exchange contracts, options, etc.
Export sales rebounded strongly. Since 2023Q3, the removal of overseas small household appliances has ended, and the company's export sales rebounded relatively quickly under a low base. 23Q3/23Q4/24Q1 companies' export sales revenue was +38%/+52%/+30% year on year, respectively; export sales revenue increased 11% year on year to 10.8 billion yuan in 2023. It is expected that Q2's export sales will continue the high growth trend, and then return to normal growth with the steady recovery of overseas demand and product expansion and upgrading.
Domestic sales revenue stopped falling and rebounded. Affected by domestic demand, retail sales of China's small kitchen appliances industry fell 9.6% year on year in 2023 (overall data from Aowei Cloud Network). The company's domestic sales revenue in 2023 fell 3.2% year on year to 3.84 billion, with independent brand revenue falling 6.1% to 2.71 billion yuan. However, since 2023Q4, the company's domestic sales revenue has achieved a steady recovery of +0.6%/+7.0% year-on-year respectively in 23Q4/24Q1. While consolidating the advantages of small appliances in Western-style kitchens, the company is vigorously expanding household appliances, personal care for mothers and children, refrigeration appliances, etc., and the independent brand business is expected to achieve continuous growth.
Household appliances are resilient to recovery in the second half of the year. The company's revenue from kitchen appliances in 2023 was +4.1% to 9.90 billion, H1/H2 -10.9%/+20.7% year-on-year; revenue from household appliances +20.4% to 24.9%, H1/H2 -16.0%/+62.0% respectively; revenue from other products +3.1% to 1.94 billion, and H1/H2 respectively -3.7%/+9.1%.
Gross margin has improved, and operating profit has increased. The company's gross margin in 2023 was +1.6pct to 22.7%, with OEM gross margin +2.3pct to 20.2%, own-brand gross margin +0.8pct to 33.9%; Q1 company's gross margin was +0.03pct year-on-year. The company's 2023 sales/management/R&D/finance expense ratio was +0.5/+0.3/+1.3 pct year on year, and 2024Q1 was -0.3/-0.3/-2.0pct year on year, respectively. Changes in financial expense ratios were mainly affected by exchange profit and loss. However, the company's impact on the exchange rate gradually decreased. In 2023, the company's exchange earnings were 85.54 million yuan, and foreign exchange forward losses were 79.47 million yuan, which had a total impact of 6.07 million yuan. However, due to the positive impact of the exchange rate of 170 million yuan in 2022, there was a year-on-year drag. 2024Q1's exchange earnings were +78.86 million yuan year on year, and foreign exchange forward losses were +80.41 million yuan year over year, with little impact year on year. In 2023, the company's net profit margin was -0.3 pct to 6.7% year on year, and 2024Q1 net profit margin was +0.1 pct year on year to 5.0%.
Risk warning: Raw material prices fluctuate greatly; industry competition intensified; exchange rates fluctuated greatly.
Investment advice: adjust profit forecasts and maintain a “buy” rating
Xinbao Co., Ltd. is the world's leading small home appliance foundry. It has rich resources for export customers, and its own domestic sales brands are expected to continue to grow. The company's net profit for 2024-2026 is 11.3/12.7/1.41 billion (previous value was 11.3/12.4 billion), with a growth rate of 16%/12%/11%, PE = 12/11/10x, maintaining a “buy” rating.