Incident: The company disclosed its report for the first quarter of 2024, achieving operating income of 1,153 million yuan, an increase of 42.68%; net profit to mother was 123 million yuan, an increase of 170.35% year on year; after deducting non-net profit, it was 113 million yuan, an increase of 324.71% year on year. Comments on this are as follows:
The Q1 performance increased year over year in '24, and profitability continued to improve. Q1 The company's revenue increased significantly, mainly due to the gradual recovery of overseas markets. By business, kitchen and bathroom products increased a lot over the same period last year, and hardware leaders showed outstanding performance. Q1 The company's gross margin/net margin was 27.05/ 10.66% respectively, up 3.89/5.04pct year-on-year respectively. The company's net operating cash flow was 108 million yuan, an increase of 147.59% over the previous year. The cost rate for the period was 14.02%, a year-on-year decrease of 4.27pct. Among them, the sales/management (including R&D) /finance expense ratios were 3.37/10.60/ 0.04%, respectively, down 0.30/2.77/1.21pct year-on-year, respectively.
Share buybacks are intended to be used as equity incentives to demonstrate confidence in future development prospects. On February 6, 2024, the company issued a repurchase report and promoted the company's “improving quality, efficiency and return” plan. The proposed repurchase capital shall not exceed RMB 40 million and not less than RMB 20 million to implement the equity incentive plan. The repurchase price shall not exceed RMB 18.97 per share; the source of the repurchase capital is the company's own funds. As of March 31, 2024, the company has repurchased a total of 1.012 million shares, accounting for 0.22% of the company's total share capital. This repurchase shows the company's confidence in long-term development and is conducive to further establishing and improving the company's long-term incentive mechanism.
Investment advice: Q1 performance continued to increase, export sentiment continued to recover, and maintain an increase in holdings rating. The company's net profit from 2024 to 2026 is expected to reach 484, 582, and 667 million yuan, respectively, up 14%, 20%, and 15% year-on-year, respectively, corresponding to PE valuations 15, 12, and 11 times. The company deepens its international layout, helps expand overseas markets and develop new businesses; accelerates channel expansion and brand building to expand its influence in the domestic market; and actively buyback shares for equity incentives, showing confidence in long-term development.
Risk warning: macroeconomic policy changes; risk of price fluctuations of major raw materials; increased industry competition; risk of lower market demand than expected; risk of real estate regulation; risk of putting into operation of fund-raising projects; risk of changes in exchange rates and export policies.