Incidents:
Del Mar released its 2023 annual report and 2024 quarterly report. The 2023 revenue was 3.153 billion yuan (-4.64% year over year), net profit to mother was 109 million yuan (-42.93% year over year); 2023 Q4 revenue was 882 million yuan (-12.18% year over year), and net profit to mother was 0.09 million yuan (-90.39% year over year). Q1 2024 revenue was $716 million (+7.69% YoY), and net profit to mother was $23 million (+0.52% YoY).
Comment:
Living and sanitary ware are dragging down revenue growth, and the healthy and steady development of water. In 2023, the living and sanitary ware business achieved revenue of 4.43 million yuan (-95.7% year over year), mainly because the company focused more on categories and brand strategies, reduced cooperation with brands such as Vantage, and terminated the Vantage brand lifestyle and sanitary ware business during the reporting period; the water health business achieved operating income of 1.16 billion yuan (+10.3% year over year), gross margin of 37.57%, an increase of 1.99 pct year on year; the home environment business achieved operating income of 1,389 million yuan (-10.22% year over year), gross margin of 25.44% year on year increase 1.92pct The company adheres to the “Del Mar” and “Philips” dual brand drivers, and its brand strength is growing year by year. Looking at channels, the company achieved overseas revenue of 584 million yuan (+29.77% year over year), gross margin was 36.00%, an increase of 4.70 pcts over the previous year, and the cross-border e-commerce business progressed rapidly.
Increase market traffic investment and build global marketing capabilities. In 2023, the company's sales expenses ratio was 19.32%, an increase of 3.79pc over the previous year, and the sales expenses ratio increased significantly. Facing the current situation where homogenized competition for domestic small household appliances is intensifying and internet traffic dividends are weakening, the company has adjusted its marketing strategy, placed more emphasis on content production and operation, actively laid out emerging e-commerce channels, and increased the construction of global marketing capabilities. Overall, the company's own brand awareness has been effectively raised.
The R&D system promotes product iteration, and the Internet has rich experience in operation. The company set up a home and water health research and development center to actively learn about Philips's systematic product life cycle management system. The team has been deeply involved in e-commerce agency operations for many years, and has obvious advantages in private customer data, consumer portraits, etc.
Profit forecast: Taking into account the competitiveness and innovation of the company's products, we expect the company's revenue in 2024-2026 to be 35.5/39.6/4.36 billion yuan, up 12.7%/11.5%/10.1% year on year; net profit to mother will be 1.9/2.0/ 230 million yuan, up 70.3%/11.8% year on year. First coverage, giving a “buy” rating.
Risk warning: raw materials rise, domestic demand falls, performance forecasts and valuations fall short of expectations