Incident: Mrs. Good released the 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating income of 1,688 billion yuan, up 22.16% year on year; net profit to mother was 327 million yuan, up 49.71% year on year; net profit after deduction was 323 million yuan, up 46.18% year on year. 23Q4 achieved operating income of 572 million yuan, up 53.05% year on year; net profit to mother was 89 million yuan, up 92.11% year on year; net profit after deduction was 94 million yuan, up 110.08% year on year. 24Q1 achieved operating income of 292 million yuan, up 5.73% year on year; net profit to mother was 56 million yuan, up 15.07% year on year; net profit after deduction was 55 million yuan, up 15.75% year on year.
The share of rapid growth in smart home revenue increased. Looking at products that bucked the trend in 24Q1, the company's smart home/clothes rack products achieved revenue of 1,433/216 million yuan respectively in 2023, up 26.39%/1.58% year-on-year respectively. 1) Smart drying rack: The company has continued to innovate in technology for 23 years. The self-developed Blue Whale power system for clothes dryers has been fully industrialized, leading the industry's load-bearing parameters, launched the “Extremely Thin” series of new products for rapid release, and the proportion of smart home products continues to increase. Among them, sales of smart products increased 17.77% in '23, and sales of cost-effective models grew at an impressive rate. 2) Drying rack: The company's traditional clothes rack revenue has remained stable for 23 years.
The 24Q1 company's revenue increased 5.73% year over year, bucking the trend and growing steadily in an environment where optional consumption was relatively under pressure. The company will maintain its leading edge in industry technology. It has continuously developed industry-leading technologies such as intelligent stroke adaptation, gesture sensing, and sunlight tracking and drying, and will continue to promote new technologies for 24 years.
Offline channels have been repaired and are growing at an accelerated pace. Looking at online channels, the company's e-commerce and offline revenue in 2023 was 1,006 billion yuan/666 million yuan respectively, +13.71%/+37.51% over the same period last year. 1) In terms of e-commerce channels, the company's traditional e-commerce platforms such as Tmall and Jingdong achieved steady growth in 23, accelerated the deployment of new platforms such as Douyin, and cultivated new categories through a combination of live broadcasts, short videos, and KOL promotion. 2) In terms of offline channels, in '23, the company accelerated channel decline, deepened the layout of new channels such as hardware stores, new retail, and KA. At the same time, it deeply empowered dealers through dealer terminal displays, professional training, marketing activities, and supporting policies, and continuously consolidated its leading edge in offline channels.
Product structure optimization+component self-production ratio is expected to continue to increase, supporting the improvement in gross margin profitability. In terms of profitability, the company's gross margin was 51.35% in '23, an increase of 4.99 pct over the previous year. 23Q4's gross margin was 53.05%, up 3.30pct year-on-year. The 24Q1 gross margin was 51.94%, up 6.23pct year-on-year. The company's gross margin increased significantly in 23, mainly due to 1) Self-production of core components: In '23, the company continued to increase the self-supply ratio of core components and motor components, reduce costs, and help increase gross margin. The company will continue to increase its self-supply motor production capacity in 24 years to further reduce costs and increase efficiency. 2) Product structure optimization: In '23, the company launched ultra-thin new products and successfully released them, increasing the price range of the main sales products. In 24 years, the company will continue to increase the proportion of self-produced components, supply chain optimization and other measures to control costs;
In terms of period expenses, the company's expenses rate for the 23-year period was 28.16%, up 1.30pct year on year, and the sales/management/R&D/finance expense ratios were 20.33%/5.17%/3.15%/-0.48%, respectively, and +1.66/-0.39/-0.02/+0.05pct, respectively. Among them, sales expenses increased, mainly due to strong marketing during the online promotion period. The 24Q1 company's expense ratio was 31.48%, up 3.87pct year on year, and the sales/management/ R&D/ finance ratio was 21.95%/7.24%/3.46%/-1.16%, respectively, +3.14/+0.41/+0.57/-0.24pct, respectively.
Under the combined influence, the company's net interest rate in '23 was 19.36%, up 3.55pct year on year; the net interest rate for 23Q4 was 15.52%, up 3.15pct year on year. In 24Q1, the company's net margin was 18.98%, up 1.53pct year over year.
Investment suggestion: Good Wife continues to build the core competitiveness of smart homes with leading technology to further enrich the whole house smart product package. With the continuous construction of the provincial operating platform, the accelerated expansion of online channels, and the optimization of the engineering channel structure, the company is expected to achieve steady growth. We expect Good Wife's revenue for 2024-2026 to be 20.57, 24.77, and 2,962 billion yuan, up 21.82%, 19.60% year on year; net profit to mother will be 3.94, 4.78, and 567 million yuan, up 20.26%, 21.39%, 18.68%, corresponding PE of 15.5x, 12.8x, 10.8x, corresponding to a target price of 19.51 yuan for 24 years, giving a buy-A investment rating.
Risk warning: Risks such as increased competition in the industry, falling short of expectations in household demand, and falling short of expectations in the penetration rate of smart homes such as smart clothes hangers.