Event: 23A: The company achieved revenue of 4.617 billion yuan, -11.40% year on year; net profit to mother - 474 million yuan, -278.40% year over year; net profit after deduction - 428 million yuan, -293.05% year on year. Among them, 23Q4 achieved revenue of 1,149 million yuan, +10.83% year over year; net profit to mother - 299 million yuan, -568.26% year over year; net profit after deducting non-return to mother - 250 million yuan, -631.59% year on year. 24Q1: The company achieved revenue of 1,636 billion yuan, +5.45% year on year; net profit of 130 million yuan, +48.46% year on year; net profit without return to mother of 132 million yuan, +58.49% year on year; revenue performance both achieved positive year-on-year growth.
The stock replenishment cycle has begun, and restorative growth is expected in 24 years. Affected by multiple adverse factors such as inventory removal from downstream channels, high inflation in North America suppressing consumer demand, and “cold spring” weather in North America, the company's overall revenue side was under pressure in '23. Among them, the private brand business (accounting for about 79% of revenue) was basically the same as in the same period in '22 (+4.64% of revenue), and the ODM business (accounting for about 21% of revenue) was -43.70% year-on-year revenue due to customer order cuts. Recently, the year-on-year growth rate of the company's revenue has been corrected for two consecutive quarters. With the end of the inventory removal cycle, the demand for active inventory replenishment from retailers and ODM customers is gradually showing, and the company's revenue may be returning to a growth trajectory. For example, with the completion of Amazon's inventory reduction goal, purchasing intentions for the company began to pick up, and the company expects its sales revenue to grow by about 80% in '24 (Amazon's revenue accounted for 7.83% in '23).
The commercial footprint continues to expand. 2023 is the first year the commercial zero-steering lawn mower OptimusZ was introduced to the market. Once it was launched, it was recognized by many professional customers and was favored by STIHL. The company has already reached a cooperation with it to manufacture such products under the brand. As the number of deliveries increased in 2024, it will also help increase the company's revenue for that year. In addition, over the past 23 years, the company has successively launched multi-size commercial lithium-ion zero-steering lawn mower products, as well as new 82V commercial pusher, handheld and other tools, comprehensively laying out the “commercial leader, comprehensive leadership” strategy.
Multiple factors constrained profit for 23 years. In '23, the company's gross sales margin was 22.72%, 3pct year on year; of these, 23Q4 sales gross margin was 11.24%, -17.53pct year on year. The reason for the decline in gross margin was due to declining revenue, poor amortization of costs, increased promotional deductions, and absorption of high-priced inventory at the end of 2022. The overall cost rate increased in 23 years: the company's sales/management/ financial/ R&D expenses were 17.57%/11.80%/-0.46%/4.82%, respectively, +5.86/+2.83/+2.52/+0.72pct; of these, 23Q4 company's sales/management/finance/R&D expenses rates were 19.90%/14.38%/0.05%/0.89%, respectively, +5.43/+3.76/+1.37/ -3.77pct. Cost rate fluctuations were mainly due to the company's comprehensive launch of a new series of commercial products to the market in '23, increasing investment in sales, R&D and management personnel to develop new markets and customers. Fluctuations in financial expenses were mainly affected by the exchange rate; at the same time, pressure on the company's revenue side further boosted the cost rate level. Gross profit is under pressure and high expenses, and the company's net loss for 23 years was 474 million yuan. 24Q1's gross sales margin was 30.29%, -3.66pct year-on-year. 24Q1 The company's sales/management/finance/R&D expense rates were 11.13%/7.73%/-0.13%/3.20%, respectively, +1.00/ -1.82/-2.10/-0.75pct. Under the combined influence, the company's 24Q1 net profit margin was +2.3 pct to 7.94% year on year, and has recovered to a historically high level.
Investment advice: In the long run, as the lithium battery penetration rate in the industry continues to increase, lithium battery OPE still has broad development prospects and market space. In the short term, against the backdrop of the end of the global OPE market channel inventory removal cycle and the beginning of commercial OPE lithium electrification, the company is expected to use the advantages of the local lithium battery industry to achieve revenue growth in the commercial sector. Considering inventory replenishment requirements and revenue growth brought about by the launch of the company's commercial products, we raised the company's revenue and slightly lowered the gross sales margin. The company's net profit for 24-26 is estimated to be 2.7/3.3/3.9 billion yuan (the value was 220/370 million yuan 24-25 years ago), and the corresponding dynamic PE is 28.8x/23.6x/20.2x.
Risk warning: Market competition risk; sales of new products fall short of expectations; sales of private brands fall short of expectations; export orders fall short of expectations; rising raw material prices and rising freight costs lead to a decline in profits.