Core views

The company's revenue performance in 2023 and 2024Q1 is under pressure, mainly affected by the slump in overall demand in the integrated stove industry. The company's e-commerce and other channels have grown rapidly, and washing products and other integrated kitchen appliances have 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 22, 2024, Shuaifeng Electric released its 2023 annual report; on April 29, 2024, Shuaifeng Electric released its report for the first quarter of 2024.

The company achieved operating income of 831 million yuan (YOY -12.23%), net profit of 190 million yuan (YOY -11.51%), and net interest rate of 22.84% (YOY+0.19pct); of these, Q4 achieved operating income of 207 million yuan (YOY -12.67%), net profit to mother of 50 million yuan (YOY -19.27%), and net profit of 24.34% (YOY-1.99pct).

2024Q1 achieved operating income of 117 million yuan (YOY -32.96%), net profit attributable to mother of 0.2 billion yuan (YOY -44.50%), and a net margin of 18.94% (YOY-3.94pct).

Brief review

1. Revenue analysis: Build a second growth curve and improve the layout of emerging channels 1. By product: demand for integrated stoves is under pressure, other categories contribute 1) Integrated stoves: achieve revenue of 718 million yuan (YOY -16.40%) in 2023, accounting for 86.47%. 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. According to Euromonitor data, the Shuaifeng integrated cooking stove led the national sales volume for five consecutive years in 2019-2023, and is in a leading position in the industry.

2) Other kitchen supplies: Achieved revenue of 63 million yuan (YOY +53.52%), accounting for 7.61%. The company has successively launched a series of products such as sinks, dishwashers, integrated sinks, built-in kitchen appliances, gas water heaters, and integrated cooking centers. Since then, it has continuously increased the supporting rate and customer unit price to drive the growth of kitchen appliances revenue. The company is actively building a second growth curve based on consumer trends in categories such as integrated cooking centers and integrated stove washing centers.

3) Wooden cabinets: achieved revenue of 0.39 million yuan (YOY +31.60%), accounting for 4.67%.

The company supplies cabinet products, and at the same time gradually promotes the customized layout of the whole kitchen and the whole house to provide consumers with a one-stop integrated smart kitchen solution.

4) Other business: Achieved revenue of RMB 10 million (YOY -37.47%), accounting for 1.25%.

II. Channel division: e-commerce channel growth, improving the layout of emerging channels 1) Distributors: achieved revenue of 728 million yuan (YOY -16.79%), accounting for 87.59%. In 2023, the company added and optimized more than 100 dealers, maintained the number of dealers close to 1,300, and continuously improved the quality of dealers; at the same time, it continued to improve the store experience and supporting product display of Shuai Feng's fifth-generation image store to improve the quality of dealer stores. At the same time, the company continues to promote general cooperation, sign a number of new headquarter-based home improvement companies, maintain and gradually strengthen cooperation with Hunan Qiansi Decoration in activities and sales, to help dealers develop multiple channels such as home decoration designers and master craftsmen. By the end of 2023, the company had achieved more than 1,200 local home improvement cooperation outlets, adding 3 new general home improvement companies, and the company had about 2,200 sales terminals.

2) E-commerce: Achieved revenue of 70 million yuan (YOY +66.19%), accounting for 8.39%. The company has stepped up online marketing efforts, enriched online products, and launched multiple online and offline models to better meet the needs and choices of dealers and retail customers, and promote integrated sales and development between online platforms and offline stores. At the same time, the company comprehensively promoted and carried out marketing actions such as in-store sampling, training and marketing support for JD Home Appliance Stores and Tmall Premium to assist in increasing external service providers, and jointly promote the expansion of the sinking channel market. It is committed to building a model market for service providers to expand. In 2023, the company's declining channel sample stores covered more than 300 stores.

3) Offline direct sales and others: Achieved revenue of 0.31 million yuan (YOY +8.29%), accounting for 3.76%. It is mainly about expanding sales of customized products for the whole house.

4) Overseas: Achieved revenue of 0.2 billion yuan (YOY +70.12%), accounting for 0.26%. Mainly due to rising demand from international customers.

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

1) Margin side: Low demand and rising raw material prices, gross margin was 46.86% (YOY+0.76pct) in 2023, of which Q4 gross margin was 44.05% (YOY-2.85pct); 2024 Q1 gross margin was 44.59% (YOY-3.12pct). By category, the gross margin of integrated stoves in 2023 was 49.43% (YOY+1.40pct), the gross margin of other kitchen utensils was 24.36% (YOY+12.82pct), and the gross margin of wooden cabinets was 30.37% (YoY+12.06pct). In 2023, it mainly benefited from the cost dividends brought about by declining prices of raw materials for integrated stoves, as well as the scale effect achieved by emerging categories. The gross margin of 2024Q1 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: Q4 cost control, Q1 sales cost rate increased by 0.32 pct year on year, sales/management/R&D/finance cost rates were +1.04/-0.17/-0.19/-0.36pct year on year, respectively. Among them, the cost rate decreased by 2.95 pct year on year during Q4, and the sales/management/R&D/finance expense ratio was -4.73/+0.28/+1.15/+0.35pct, respectively; during the 2024Q1 period, the cost ratio increased by 11.04 pct year on year, sales/management /R&D/finance cost ratios were +7.86/+3.22/+1.74/ -1.79pct, respectively.

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

2023 net margin was 22.84% (YOY+0.19pct), of which Q4 net margin was 24.34% (YOY-1.99pct); 2024Q1 net margin was 18.94% (YOY-3.94pct). 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 has outstanding high-end integrated stove products. The second-generation succession optimizes the management organization structure and diversified channel layout. Currently, the second category and product matrix are continuously being improved and expanded. Based on the layout of consumer trends, the new categories and channels are expected to contribute to the increase. We predict that in 2024-2026, the company will achieve net profit of 1.90/2.02/213 million yuan, corresponding EPS of 1.03/1.10/1.16 yuan, and the current stock price corresponding PE is 13.56/12.74/12.08 times, maintaining a “buy” rating.