Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company's revenue was 15.69 billion yuan, +11.5% year-on-year; net profit to mother was 3.87 billion yuan, +21.4% year-on-year. Among them, 23Q4 revenue was 4.09 billion yuan, +13.3% year-on-year; net profit to mother was 1.06 billion yuan, +27.8% year-on-year. 2024Q1's revenue was 3.80 billion yuan, +14.1% year on year; net profit to mother was 9.3 billion yuan, +26.3% year over year.
The company continues to carry out channel construction and transformation, continuously polish products, and strengthen the high-end fashion brand image. View annual reports by business:
Smart electrical lighting business: revenue of 7.90 billion yuan, +15.4% year-on-year. The company promotes integrated sales from both product design and channel transformation, promotes brand upgrading, expands channels such as home improvement and engineering, and achieves growth by expanding categories and channels. (1) In terms of products, create an intelligent electricity product ecosystem with no main lamp as the core. The headlight business operates under both Bull and Muguang brands. Bull is positioned as cost-effective; Muguang is positioned as high-end to enhance intelligence and design. The company complies with the product upgrade strategy and strengthens product strength. The development of new wall opening and LED lighting products follows industry trends such as intelligence and ultra-thinness; the headlamp-free product line enhances the light environment and control experience; and iteratively innovates intelligent ecological products to suit more home scenarios. (2) In terms of channels, promote comprehensive and exclusive upgrading of stores to meet consumers' one-stop shopping needs; adapt to consumer trends and expand cooperation with construction companies, and actively develop engineering project business. Online channels continue to grow, brand advantages are stable, and the company is gradually using digital means to integrate online and offline traffic. Bullless Headlamp relies on original channel sales. Muguang Headlamp has built its own channels since 2023, and has completed the construction of a systematic marketing network. The stores basically cover provincial capitals, most prefecture-level cities, and economically developed regions across the country.
New energy business: Revenue of 380 million yuan, +148.6% year-on-year. It has completed product and channel expansion from charging to energy storage, and from C-side to B-side, and is developing rapidly. The charging gun/pile business is developing rapidly, and the product line has a comprehensive layout. C-end online has steadily taken the leading position among third-party brands, and the coverage rate of offline channel outlets has increased rapidly. By the end of '23, more than 17,000 terminal outlets had been developed, and a sales and service network covering urban and rural areas had initially been built. The B-side channel has greatly improved expansion efficiency, and by the end of '23, it had developed more than 1,500 operator customers. Energy storage products have completed the development of household energy storage and industrial and commercial energy storage. Among them, household energy storage is already in the overseas testing and verification process.
Electric connection business: Revenue of 7.39 billion yuan, +4.8% year-on-year, steady development. The company has a stable advantage in the converter category. On the one hand, it continues to innovate around segmented electricity consumption scenarios to promote product line upgrades and ensure stable average unit prices; on the other hand, it optimizes products according to different channels, promotes integrated sales, and increases customer unit prices. The company actively explores emerging markets in Southeast Asia and has carried out localized innovation through market research and other methods for 23 years. Meanwhile, digital accessories adhere to the third-party boutique strategy and continue to enrich the channel format.
Actively promote internationalization and open up market space. As the third major strategy in addition to intelligent ecology and new energy, internationalization is currently the direction the company is actively preparing and promoting. In 2023, the company established an international division and established overseas subsidiaries such as Germany and Indonesia. For companies in emerging markets, the business of electrical connectivity and electrical lighting will be expanded.
In 2023, the company completed the upgrade of the dealer system in major Southeast countries, and at the same time began in-depth research and dealer recruitment for markets such as the Middle East and South America, and is actively promoting product localization. For European and American market companies, the core entry is the new energy charging and household energy storage business. The company has carried out pilot investment and trial sales work in Germany, and completed preliminary verification of the business model.
Increased gross margin led to an increase in profitability. The company's gross profit margin in 2023 was 43.2%, +5.2 pct year over year, and 24q1 +5.0 pct year over year. The significant increase in gross margin has benefited from falling prices of raw materials such as copper, as well as lean management measures such as centralized procurement. The sales, management, and R&D cost rates were +1.1 pct, +0.4 pct, +0.1 pct, and +0.7 pct in 24Q1, respectively. The overall increase in cost rates was mainly due to the fact that the two new business lines without headlights and new energy are still in the investment period, while internationalization is also being actively developed. Taken together, the company's net interest rate for 23 years was 24.7%, +2.0pct year over year, and 24Q1 +2.4pct year on year, increasing profitability.
Measures such as centralized procurement will continue to reduce the company's costs and help stabilize the company's net interest rate at a high level. In the long run, with the gradual expansion of new businesses, the cost ratio is expected to gradually decline and increase profitability.
Profit forecasting and investment ratings: The company's two cornerstones are business transformation, and it is expected to recover steadily this year; the company relies on channel layout and electrical connection technology advantages to expand categories, and at the same time actively lays out overseas markets, and growth can be expected. The company's past business performance has grown steadily, and the strategy is clear. There is no headlight and there is huge market space for the two new businesses of new energy. Overseas markets need to be explored urgently. We are optimistic that Bull Group will continue to grow steadily in the future. The company's net profit for 2024-2026 is estimated to be RMB 44.0, 48.9, RMB 5.61 billion, and EPS is RMB 4.9, 5.5, and 6.3, respectively. Currently, PE corresponding to the stock price is 25.3, 22.8, and 19.8 times, respectively. We maintain the “recommended” rating.
Risk warning: Real estate sales declined more than expected; new business expansion fell short of expectations; raw material prices rose beyond expectations.