Incident 1: The company announced its 2023 annual report. In 2023, the company achieved revenue of 14.647 billion yuan, an increase of 6.94% over the previous year, and achieved net profit of 977 million yuan to mother, an increase of 1.64% over the previous year.
Incident 2: The company announced its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 3.474 billion yuan, an increase of 22.79% over the previous year, and achieved net profit of 173 million yuan to mother, an increase of 24.74% over the previous year.
Export sales continued to grow at a high rate, and domestic sales growth picked up. Looking at revenue by sales model, in 2023, the company's global ODM and OEM/independent brand businesses achieved revenue of 119.42/2.705 billion yuan respectively, up 10%/-6% year over year. Along with the end of overseas customer warehousing and a gradual recovery in terminal demand, the company's OEM revenue growth rate corrected; the own-brand business was under pressure in the short term due to the low prosperity of the domestic small home appliance industry. Looking at revenue by region, in 2023, export/domestic sales achieved revenue of 108.11/38.36 billion yuan respectively, +11%/-3% year on year. Among them, the company's export/domestic sales increased by 52%/1% year on year, respectively, in the fourth quarter of 2023, and domestic sales revenue corrected. In the first quarter of 2024, the company achieved revenue of 3.474 billion yuan, with a year-on-year increase of 23%. Among them, export/domestic sales increased 30%/7% year-on-year respectively. Export sales continued to grow well, and domestic sales growth continued to pick up month-on-month.
The company's profit level is relatively stable. In 2023, the company's gross margin was 22.74%, an increase of about 1.6 pct over the previous year. It is mainly due to the company promoting cost reduction at the level of technological innovation and improving production efficiency. The company's expense ratio increased by about 2.2 pct year-on-year during the 2023 period. Among them, the sales and financial expenses ratio increased by 0.5 pct and 1.3 pct year over year. The increase in the sales expense ratio was mainly due to the company's increased investment in advertising. The increase in the financial expense ratio was mainly due to a year-on-year decrease in exchange income due to fluctuations in the US dollar exchange rate. The company's net profit margin in 2023 was 6.67%, a year-on-year decrease of about 0.3 pct. The company's gross profit margin and net profit margin for the first quarter of 2024 were 21.92% and 4.97% respectively, up about 0.03 pct and 0.08 pct, respectively. The profit level was relatively stable.
Practice internal skills, improve manufacturing efficiency, and continue to expand new product categories. On the manufacturing side, the company prioritizes investing in efficiency improvement and capacity expansion projects at the fixed asset investment level, increasing resource investment in the company's automation equipment, striving to achieve the goal of increasing efficiency by 20% within 3 years, and further expanding its cost leadership. At the same time, on the product development side, the company adheres to the concept of “no innovation, no project establishment” and maintains continuous investment in new product categories. The company recently exhibited a swimming pool cleaning robot at the Canton Fair. Users can control the robot with a mobile phone to clean the pool water line, wall, floor and other areas. Currently, the product has received intended orders from some European and American customers.
The domestic sales revenue assumption is adjusted appropriately. The company's net profit for 2024-2026 is estimated to be 10.82/12.36/1,361 billion yuan (previously estimated 2024-2025 was 11.12/1,271 billion yuan). Combined with a comparable company estimating the company's price-earnings ratio of 17 times 2024, corresponding to a target price of 22.44 yuan, maintaining a “buy” rating.
Risk warning
The risk of profits falling short of expectations and declining valuations due to insufficient ability to innovate new products in China; the risk that demand for ODM orders from small overseas household appliances brands will not meet expectations.