Incident: The company disclosed its 2024 quarterly report, achieving operating income of 997 million yuan, a year-on-year increase of 11.19%; net profit to mother of 154 million yuan, a year-on-year decrease of 11.56%; deducted non-net profit of 142 million yuan, an increase of 37.61% year-on-year.
The performance of deducted non-performance in Q1 in '24 was impressive, and retail and overseas business grew positively. In Q1 2024, the company's retail business maintained steady growth in the context of fierce market competition. In overseas markets, the integration of Singapore Jetstream progressed steadily, and its sales revenue and operating quality improved markedly. Q1 The company's gross margin/net margin was 41.48/ 15.77% respectively, with year-on-year changes of +4.30/ -3.95pct. The increase in gross margin was mainly due to the year-on-year decline in raw material prices and an increase in the share of retail business. The company's net operating cash flow was -176 million yuan, a year-on-year decrease of 23.76%. The company's expenses rate for the period was 23.89%, an increase of 1.2 pct over the previous year.
Among them, the sales/management (including R&D) /financial expense ratios were 15.05/10.40/ -1.56%, respectively, with year-on-year changes of +1.22/ -0.34/+0.31pct. The company's Q1 investment income was 2,842,300 yuan, down 95.93% year-on-year from the 2023Q1 69.886 million yuan, mainly due to a decrease in fair value change income generated from financial assets held by Ningbo Dongpeng Heli Equity Investment Partnership (Limited Partnership) in the current period. Other income was 1986.24 million yuan, an increase of 199.76% over the previous year, mainly due to an increase in government subsidies received during the current period.
With deep retail cultivation, improved engineering quality, and clear strategic planning, the 24-year revenue target is a 14% increase. On the retail side, the company paid close attention to channel expansion and optimization, focused on the core market, and increased its market share by more than 3 percentage points in 2023. As of 2023, the company has set up more than 50 sales companies across the country, with more than 1,900 professional marketing and service personnel, and more than 30,000 marketing outlets. On the engineering side, the company is committed to improving operational quality and resilience to risks. At the same time, it actively explores and lays out emerging fields and strives for innovation and growth. In 2023, direct sales revenue was 1,417 billion yuan, down 14.15% year on year, accounting for 22.22% of revenue, down 1.52 pct year on year. According to the company's annual report, in 2024, the company's revenue target is 7.3 billion yuan (up 14% from the same period), and the cost and expense target is about 5.7 billion yuan.
Investment advice: Excellent performance in Q1 deduction, continuous improvement in business quality, and maintenance of the shareholding increase rating. The company's net profit from 2024 to 2026 is expected to reach 1.45 billion yuan, 15.5 billion yuan, and 1.66 billion yuan respectively, up 1%, 7%, and 7% year-on-year respectively, corresponding to the PE valuation 19, 18, and 17 times. The company established a “flat” distribution model, pioneered the “Star Manager” characteristic value-added service, innovated the business model, and deepened the home improvement moat; continued to promote the concentric strategy, actively lay out the waterproof, water purification, kitchen and bathroom fields to effectively improve product support rates; product+service shapes a high-end brand image, and has obvious competitive advantages.
Risk warning: the risk that raw material prices will rise beyond expectations; industry competition will increase the risk; the risk of falling demand in the downstream market; the risk of market expansion falling short of expectations, etc.