Core views

The company's revenue performance in 2023 and 2024Q1 is under pressure, mainly due to sluggish overall demand in the integrated stove industry. The company's e-commerce business grew steadily, and integrated washing products and integrated cooking centers maintained rapid growth, which is expected to create a second growth curve. Demand for integrated stoves is under pressure and rising raw material prices have led to a decline in profit margins. Looking ahead to 2024, demand in the integrated stove industry will remain low, while raw material prices may continue to rise. Profit levels are expected to continue to be pressured, waiting for industry demand to pick up and the company's operations to improve.

occurrences

On April 23, 2024, Yitian Intelligence released its 2023 annual report; on April 28, 2024, Yitian Intelligence released its report for the first quarter of 2024.

In 2023, the company achieved operating income of 1,227 billion yuan (YOY -3.80%), net profit of 179 million yuan (YOY -14.64%), and a net interest rate of 14.59% (YOY-1.85pct); of these, Q4 achieved operating income of 283 million yuan (YOY -9.56%), net profit to mother of 0.04 billion yuan (YOY -91.87%), and a net margin of 1.40% (YOY-14.16pct). In 2024Q1, we achieved operating income of 127 million yuan (YOY -44.49%), net profit attributable to mother of 0.05 billion yuan (YOY -88.88%), and a net margin of 3.57% (YOY-14.25pct).

Brief review

1. Revenue analysis: Building a second growth curve. Emerging channels contributed incrementally I, by product: demand for integrated stoves was under pressure, and contributions from other categories increased 1) Integrated stoves: achieved revenue of 1,095 billion yuan (YOY -5.76%) in 2023, accounting for 89.26%. According to data from Aowei Cloud Network, retail sales and retail sales of integrated stoves fell 4.0% and 4.2% year on year respectively in 2023; cumulative retail sales and retail sales volume of the 2024Q1 integrated stove market fell 11.9% and 10.5% year on year, respectively.

2) Other products: Achieved revenue of 132 million yuan (YOY +16.29%), accounting for 10.74%.

Other products include integrated sinks, integrated dishwashers, and integrated cooking centers. The sales scale and share continue to increase, and it is expected to create a second growth curve. In December 2023, the company set up a wholly-owned subsidiary with its own capital to carry out computing power-related business. There is no revenue yet in 2023. In the future, it will provide one-stop intelligent computing services and build a Yangtze River Delta GPU computing power center cluster, which is expected to contribute revenue.

II. Channel division: The advantages of traditional channels are stable, and the layout of emerging channels is leading 1) Distribution: achieved revenue of 982 million yuan (YOY -9.42%), accounting for 79.99%. E-commerce channel. The company uses a professional team to operate multiple online channel systems in detail. Platform e-commerce, content e-commerce, and social e-commerce go hand in hand, and actively carry out new retail business, entering sinking channel outlets such as JD Home Appliances, Tmall Premium, Five Star Wanzhentong, and Gome New Retail. The number of e-commerce business orders in 2023 was 98,500 (YOY+ 21.47%), achieving a sales amount of 903 million yuan (YOY+ 10.68%), of which the number of integrated stove orders was 98,300 million yuan (YOY +27.77%). (YOY+ 12.19%); By platform, JD's sales amount is 548 million yuan (YOY +6.57%), and Tmall's sales amount is 355 million yuan (YOY +17.67%). Offline channels. The company is deeply involved in distribution channels and rapidly expanding empty areas. By the end of 2023, it had more than 1,500 dealers, broadened home improvement and KA channels, developed engineering channels on merit, and signed strategic cooperation with leading home improvement companies and high-quality real estate agents.

2) Direct sales: Achieved revenue of 246 million yuan (YOY +28.06%), accounting for 20.01%.

II. Profit analysis: Demand is sluggish, profit levels are declining

1) Margin side: Low demand+rising raw material prices, gross margin was 48.66% (YOY+2.04pct) in 2023, of which Q4 gross margin was 45.35% (YoY+0.11pct); 2024 Q1 gross margin was 44.64% (YOY-4.84pct). By category, the gross margin of integrated stoves in 2023 was 49.93% (YOY+1.54pct), and other gross margins were 38.13% (YOY+9.64pct). 2023 mainly benefited from the cost dividend brought about by falling raw material prices for integrated stoves, as well as the scale effect achieved by emerging categories. 2024Q1's gross margin declined due to low demand and rising raw material prices. Looking ahead to this year, demand for integrated stoves is still low. Combined with rising raw material prices, gross margins are expected to be under pressure.

2) Expense side: channel expansion+fund-raising project transformation, cost rate increased by 4.14 pct year on year during 2023, sales/management/R&D/finance cost rates were +1.16/+2.43/+0.50/+0.05pct, respectively. Among them, the cost rate increased 10.99 pct year on year during the Q4 period, and the sales/management/R&D/finance cost ratio increased by +0.79/+8.04/+2.7/0.59pct; the cost ratio increased 16.28 pcts year over year during the 2024Q1 period, sales/management/ R&D/finance cost ratios were +9.94/+4.19/+1.75/+0.40pct, respectively. Main factors: 1) Management expenses increased dramatically due to increased depreciation expenses after the fund-raising project was consolidated; 2) Financial expenses increased due to increased interest fees on convertible bonds.

3) Net profit side: Net interest rate continues to be under pressure, waiting for demand to recover

The 2023 net margin was 14.59% (YOY-1.85pct), of which Q4 net margin was 1.40% (YOY-14.16pct); 2024Q1 net margin was 3.57% (YOY-14.25pct). The company's 2023Q4 and 2024Q1 net profit margin continued to decline, mainly affected by the decline in gross margin and the increase in expense ratio. Based on this year's changing trends in expense ratio and gross margin, net interest rates are expected to be under pressure in the short term.

Investment suggestions: The company continues to broaden its product line to meet the diverse needs of consumers. Expanding emerging categories such as integrated cooking centers is expected to create a second growth curve, while increasing omni-channel layout and brand marketing efforts. The decline and acceleration of home improvement channel expansion are expected to create a new growth engine. We predict that in 2024-2026, the company will achieve net profit of 1.97/2.15/231 million yuan, corresponding EPS of 1.85/2.01/2.16 yuan, and the current stock price corresponding PE is 15.21/13.96/12.98 times, maintaining a “buy” rating.