Operations rebounded steadily in the first quarter, and profits improved markedly from month to month. In 2023, the company achieved revenue of 15.50 billion/+1.2%, net profit attributable to mother of 61 million/ -64.0%, and net profit of 480 million/ -70.3% after deducting non-return to mother. Among them, Q4 revenue was 4.97 billion/-4.4%, net profit attributable to mother was 0.1 billion/-98.5%, and net profit not attributable to mother was -40 million/ -107.4%. 2024Q1 revenue was 3.47 billion/+7.4%, net profit due to mother was 300 million/ -8.7%, net profit after deducting non-return net profit of 290 million/ +0.3%. The company plans to pay a cash dividend of 3 yuan for every 10 shares. The company's Q1 revenue growth rate stopped falling and rebounded month-on-month, net interest rates improved significantly from the second half of 2023, and operations reached an inflection point.
The sweeper industry moved upward in Q1, and Covos's overseas revenue increased 20%. In 2023, the scale of global sweepers increased 0.8% year on year to 6.6 billion US dollars, and retail sales of sweepers in China increased 5.1% year on year to 13.8 billion yuan (Gfk, Zhongyikang and NPD data). Retail sales of 2024Q1 sweepers in China increased 29.2% year on year to 2.56 billion (Aowei Cloud Network data). Benefiting from the release of demand driven by early introduction of new products and falling prices, the growth rate of sweepers in China increased markedly. The revenue of the Covos brand reached 7.68 billion yuan in 2023, down 1.5% year on year. Its revenue in China fell 12% to 4.7 billion, and overseas revenue increased 20% to 3 billion yuan. The company set up an overseas headquarters in Singapore to strengthen the coverage of global online and offline channels, and the European region's revenue increased by 41%. It is expected that Q1's domestic sweeper sales revenue will recover, and export sales will continue to grow rapidly.
The growth momentum of floor scrubbers is still strong, and Sunke's overseas revenue has increased by 40%. According to summary data from Aowei Cloud Network, retail sales of floor washers in China increased 22% year on year to 12.2 billion in 2023, and 2024Q1 increased 23% year on year. Tianke's revenue in 2023 increased 5.2% year-on-year to $7.27 billion, of which overseas revenue increased 40% to $3.1 billion, and domestic revenue fell 11% to $4.2 billion. Shipments of Tianke floor washers increased 25.4% year on year to 3.27 million units in 2023, and the average price is expected to drop; Tianke Smart Technology's net interest rate fell 7.4 pct to 8.7% year on year.
Gross margin was dragged down by price in exchange for volume, and Q1 profit was positively recovered month-on-month. The company's gross margin decreased by 4.1 pct to 47.5% year on year in 2023. Its gross margin in China fell 10.8 pct, and overseas gross margin increased by 7.2 pct, mainly due to insufficient reserves of domestic products in exchange for price in exchange for volume. The company's sales/R&D/management/finance expense ratios in 2023 were +4.0/+0.5/-0.4/+0.6pct year on year, respectively, and the net margin decreased 7.1 pct to 3.9% year on year. 2024Q1's gross margin decreased by 3.5 pct to 47.2%, and the cost ratio was optimized. Sales/R&D/management/finance expense ratios were -1.6/+0.6/-1.3/-0.5 pct year on year, respectively; net interest rate was -1.5pct to 8.6% year on year, but on a month-on-month basis, the company's net interest rate has clearly recovered and is expected to usher in an inflection point.
Enrich product layout, increase efforts to reduce costs, and inflection points in business have emerged. 2023H2 quickly adjusted its strategic focus, planned and prepared a rich sweeper product matrix for 2024, and actively promoted cost reduction measures to meet consumer demand in different price segments. In February 2024, the company launched the T30 cost-effective series to make up for the shortfall in cost reduction. As the company continues to launch new products, revenue and gross margin are expected to rise steadily.
Risk warning: Competition in the industry intensifies; new product sales fall short of expectations; overseas expansion falls short of expectations.
Investment advice: adjust profit forecasts and maintain a “buy” rating
Considering the industry's exchange of price for volume and the company's active promotion of cost reduction, vigorous development of offline and overseas channels, and adjustment of profit forecasts, it is estimated that 2024-2026 net profit of 12.2/15.4/1.87 billion (previous value was 14.9/1.76 billion), +99%/+26%/+22% year-on-year, corresponding to PE = 22/17/14x, maintaining the “buy” rating.