Incidents:
The company released its 2023 annual report and 2024 quarterly report: in 2023, it achieved operating income of 15.70 billion yuan, YoY +11.5%; net profit to mother of 3.87 billion yuan, YoY +21.4%. 23Q4 achieved operating income of 4.09 billion yuan, YoY +13.3%; net profit to mother of 1.06 billion yuan, YoY +27.8%. 24Q1 achieved operating income of 3.8 billion yuan, YoY +14.1%; net profit to mother of 929 million yuan, YoY +26.3%. The 2023 cash dividend plan is to pay a cash dividend of 31 yuan (tax included) for every 10 shares, and a total cash dividend of 2.76 billion yuan (tax included) will be paid for every 10 shares transferred from the capital reserve fund, with a total cash dividend of 71.41%.
Comment:
Traditional categories are growing steadily, and new energy sources are the highlight of growth. By product, in 2023, the company's electrical connection products, smart electrical lighting products, and new energy products achieved revenue of 73.87/79.02/380 million yuan respectively, +4.8%/+15.4%/148.6% compared with the same period last year. Among electric connection products, converter products focus on the three directions of user upgrade needs, pain points in segmented scenarios, and differentiated overseas demand; the smart electrician business overcame the challenges of deep adjustments in the real estate industry and is determined to promote the transformation of a new retail model with offline flagship store+online drainage to meet the needs of consumers; the new energy business quickly completed the layout of product lines and channels from AC to DC, from slow charging to fast charging, from single pile to group charging, from charging to energy storage, from TOC to B, etc., and the revenue share increased by 1.3 pcts. By region, the company achieved domestic and overseas revenue of 1,54.94/175 billion yuan respectively in 2023, +12.3%/-33.0% year-on-year. In 2023, the company established an international division, which will accelerate localization development and fully launch overseas markets in the future.
Gross margin increased significantly, and net operating cash increased. The company's gross profit margin for the full year of 2023 was 43.2%, with a gross profit margin of 46.8% in 23Q4, +5.8pcts year on year, 42.2% year-on-year, and +5.0pcts year on year. The increase in gross margin was mainly due to internal cost reduction and efficiency, declining average procurement prices, and product structure upgrades. In 2023, the company's gross sales margin was +4.1pcts year on year, and the 24Q1 gross sales margin was +4.0pcts year over year. The company's net interest rate for the year 23 was 24.7%, +2.0pcts year-on-year, 25.8% year-on-year, +2.8pcts year-on-year, 24.5% year-on-year, and +2.4pcts year-on-year. Due to the increase in advertising expenses and marketing investment, the net interest rate increase was lower than the gross profit margin. In terms of balance sheet, the company's own cash accounted for 71% of total assets at the end of 2023, an increase of 4 pcts over the previous year. The 24Q1 company's advance accounts were 1,245 million yuan, +44% over the same period last year. The increase in advance accounts was mainly due to the fourth quarter home improvement festival. Some orders were not shipped. The first quarter was generally the high point of advance payments, which is a normal business trend. In terms of cash flow, the company's net operating cash in '23 was 4.827 billion yuan, +58% year-on-year, mainly due to the rapid increase in sales revenue.
Profit forecasting, valuation and ratings: In the long run, the company maintains its leading position as a civil electrician and actively expands new business fields such as new energy sources on the basis of consolidating its advantages in the converter field. In view of the rapid development of the company's new energy sector, the company's net profit for 2024-25 was raised to 4.5/5.1 billion yuan (up 5.9%/5.5% from the previous forecast, respectively), and the net profit forecast for 2026 was 5.8 billion yuan. The PE corresponding to the current price was 24, 21, and 18 times, respectively, maintaining the “increase” rating.
Risk warning: Increased industry competition, risk of fluctuations in raw material prices, etc.