Matters:
In 2023, the company achieved total revenue of 205.2 billion yuan, +7.8% year on year, and realized net profit of 29.02 billion yuan, +18.4% year on year; of these, 23Q4 achieved total operating income of 49.21 billion yuan, +17.7% year on year, and net profit to mother of 8.93 billion yuan, +43.9% year on year. The company plans to pay a cash dividend of 23.8 yuan for every 10 shares.
The 24Q1 company achieved total operating revenue of 36.60 billion yuan, +2.5% year-on-year, and realized net profit of 4.68 billion yuan to mother, +13.8% year-on-year.
Commentary:
Revenue growth is steady, and air conditioning production schedules are positive. 23Q4 The company's revenue growth rate accelerated again, or due to the concentrated calculation of the previous revenue at the end of the year. By product, air conditioning is still an important source of revenue for the company, with a year-on-year increase of 12.1% in '23, accounting for 74.1% of the company's overall revenue; household appliances/industrial products/green energy revenue contributed 2.0%, 4.9%, and 3.5% respectively. Among them, revenue from industrial products was +31.6%, and revenue from green energy was +51.2% year-on-year. By region, domestic sales and export sales of the main business achieved double growth of +15.2% and +7.0% respectively compared to the same period last year. 24Q1 achieved revenue growth of 2.5%, but contract liabilities increased by more than 50% compared to the beginning of the year, and there were delays in the recognition of some revenue. At the industry level, air conditioning production data has been booming since the beginning of '24. According to industry online data, domestic and export sales of household air conditioners maintained a high double-digit increase from March to March '24, reflecting a positive desire to prepare goods downstream, and the company is expected to maintain steady growth during the year.
Improved business quality and increased profitability. The company's net profit reached a new high in '23, reaching 29.02 billion yuan for the whole year, close to the previous forecast limit. In terms of profitability, gross margin/net margins for 23 were 30.6%/13.6%, respectively, and +4.5/1.4pct year-on-year respectively. We believe that the upgrading of the air conditioning product structure during the year made a positive contribution to the increase in average prices. Furthermore, the company's channel reform has gone through many years, and it is also expected to benefit from the new channel's lower price increase rate and efficient sales model. In 24Q1, the company's net profit to mother was +13.8% year-on-year, and the performance was superior to revenue. Gross sales margin was 29.45%, +2.03 pct year over year. In terms of expenses, the 24Q1 company's expense ratio was 13.6%, a year-on-year decrease of 0.5 pct, and all expenses remained stable. Under the combined influence, the Q1 net sales margin was 12.8%, an increase of 1.8 pct over the previous year.
Trade-in is actively promoted, and the high dividend cost performance ratio is highlighted. The promotion of trade-in policies for home appliances was frequent during the year. As an air conditioner leader, the company responded positively. By the end of 2023, Gree Renewable Resources had disposed of more than 56.64 million units (sets) of waste electrical and electronic products, and in April 2024, it was officially announced that it would invest 3 billion yuan to launch trade-in activities, which is expected to drive sales demand throughout the year. Looking at shareholder returns, the company has accumulated dividends of 155.298 billion yuan since listing, with a cash dividend ratio of 45% in 2023. The current stock price corresponds to a 24-year dividend rate of 5.8%. As an industry leader with undervaluation and high dividends, the company fully enjoys the dividends of the pattern. With the steady development of the air conditioning industry, the cost performance ratio of the company's configuration is prominent.
Investment advice: Considering the high demand for air conditioning production, we slightly adjusted the company's 24/25 EPS forecast to 5.69/6.10 yuan (the original value was 5.32/5.75 yuan), and the 26-year forecast was 6.51 yuan, corresponding to 7/7/6 times PE, respectively. Referring to the absolute valuation method, the target price was raised to 55 yuan, corresponding to 10 times PE in 24 years.
Maintain a “strong” rating.
Risk warning: raw material prices have risen, channel reforms have fallen short of expectations, and terminal demand has fallen short of expectations.