The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2.84 billion yuan, +11.47% year on year; net profit to mother of 219 million yuan, +3.59% year on year; net profit after deduction of +3.83% year on year. 2023Q4 company revenue +11.29%, net profit attributable to mother -24.82%, deducting non-net profit -23.12%. 2024Q1 achieved revenue of $523 million, +32.30% year over year, net profit to mother of 59 million yuan, +47.15% year over year, and net profit after deduction of +54.48% year on year.
On the revenue side, independent brands are growing beautifully. Tanks and Accessories/Smart Toilets and Covers/Same Level Drainage System Products/Other Revenue YoY -13.65%/+25.90%/+17.72%/+53.25%.
Independent smart toilet brands are growing rapidly, mainly due to the volume of Douyin channels, traffic overflow to the Tmall Jingdong platform, offline adaptation of building materials, hardware and home appliance channels, and rapid store expansion. The trend is expected to continue in 24Q1. Water goods exports are affected by overseas warehousing, and the future trend is expected to ease. Smart toilet foundry is relatively stable. Old customers have a trend of self-production, but they are also expanding new customers at the same time.
On the profit side, gross margin increased, and sales expenses increased investment. 23Q4/24Q1 gross margin was +9pct/+5pct, respectively, mainly due to changes in business structure (increase in share of independent brands), as well as raw material price reductions and exchange rate contributions. The 23Q4/24Q1 sales expense ratio was +14pct/+6pct, respectively. The main reason was the increase in brand investment, as well as the increase in investment in independent brands such as after-sales service. At the same time, increased promotions to cope with the price competition in the industry, so the 23Q4 net interest rate had a significant impact, but the 24Q1 net interest rate eased somewhat from month to month.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated at 2.8/3.5/410 million yuan, which is 18/14/12 times PE. Referring to comparable companies, based on the company's growth, the company was given a reasonable valuation of 20PE over 24 years, corresponding to a reasonable value of 13.52 yuan/share, and given a “buy” rating.
Risk warning. Real estate sales and completion fluctuated greatly, industry competition intensified, and independent brand expansion fell short of expectations.