Key points of investment:
The company issued 23A and 24Q1 results announcements: 1) 23A: The company's revenue in '23 was 1,688 million yuan, up 22.2% year on year; net profit to mother was 327 million yuan, up 49.7% year on year; after deducting non-net profit of 323 million yuan, up 46.2% year on year. In Q4, the company's revenue in a single quarter was 572 million yuan, up 53.1% year on year; net profit to mother was 89 million yuan, up 92.1% year on year; after deducting non-net profit, it was 94 million yuan, up 110.1% year on year. 2) 24Q1: In 24Q1, the company's revenue was 292 million yuan, up 5.7% year on year; net profit to mother was 56 million yuan, up 15.1% year on year; after deducting non-net profit, 55 million yuan, up 15.8% year on year.
Channel: E-commerce+offline collaboration, omnichannel layout strengthens competitiveness. In '23, the company's e-commerce revenue was 1.06 billion yuan, up 19.4% year on year, and offline (South District+North Zone) revenue was 666 million yuan, up 26.5% year on year. E-commerce channel. The company's e-commerce has been ranked No. 1 in sales in the industry for 8 consecutive years, and continues to maintain the steady growth of e-commerce platforms such as Tmall and Jingdong; at the same time, it quickly lays out new platforms such as Douyin and focuses on cultivating new categories. Using live broadcasts, short videos, and KOL promotion as entry points, it is possible to cultivate weeds outside the site, lock down within the site, and refine operations through a combination of punches. Offline channels, through rational layout and steady expansion of the “Frontier and Renewal” campaign, build a more complete terminal marketing system with accurate investment in cities and divisions; accelerate channel sinking and deepen the layout of new channels such as hardware stores, new retail, KA, etc.; introduce multi-level full-chain store management standards and store digital terminal systems to strengthen accurate matching of “people and stores” and improve the quality of terminal retail operations; at the same time, deeply empower dealers.
Product: Focus on R&D and promotion to consolidate product advantages, and the multi-category layout opens up room for growth. In '23, the company's revenue from smart home products was 1,433 billion yuan, up 26.4% year on year, and revenue from ordinary clothes rack products was 216 million yuan, up 1.58% year on year.
The company always adheres to the product leadership and multi-category development strategy, and lays out smart home products (smart drying racks, smart door locks, etc.), ordinary drying racks (hand drying racks, floor drying racks, external drying racks), and others (drying racks, towel racks, etc.). At the same time, around the product development idea of “research generation, reserve generation, and development generation”, we continuously improve the three-level R&D system for basic research, applied technology research, and product development, continue to independently develop and introduce new products, new materials, new processes, and new technologies to consolidate product advantages.
Profit: Cost reduction and efficiency improvements continued to be reflected, and gross margin increased significantly year-on-year. The company's gross margin in '23 was 51.4%, up 5.0 pct year on year, net profit margin was 19.4%, up 3.6 pct year on year, 24Q1 gross margin was 51.9%, up 6.2 pct year on year, net margin was 19.0%, 1.5 pct year on year. The significant year-on-year increase in the company's gross margin was mainly due to implementation of cost reduction and efficiency measures, optimization of production processes, reasonable cost control of production, product updates and iterations. In terms of expenses, the company's expense ratio was 28.1%, up 1.2 pct year on year, mainly due to an increase in sales expenses. The sales expenses rate increased by 1.7 pct to 20.3% year on year, and the 24Q1 sales expense ratio increased 3.1 pct to 21.9% year on year. In order to expand sales scale, strengthen promotion efforts on offline channels and e-commerce platforms, and increase investment in advertising, etc., the sales expenses rate increased year on year.
Enjoying the dividends of smart drying racetrack expansion, good wife can be expected to continue to grow. Driven by technological development and consumption upgrades, the drying industry is undergoing intelligent upgrading. The penetration rate of smart clothes dryers is expected to increase rapidly, driving the expansion of the smart drying market. Good Wife is deeply involved in the drying industry, occupied the minds of consumers earlier, and became synonymous with the drying category. She is leading the development of the industry with strong brand power, product power and diversified channel layout. Driven by the dividends of the smart drying circuit expansion, it is expected to continue to grow!
Increased penetration is expected to drive the rapid expansion of intelligent drying tracks, the company's brand and product advantages continue to be consolidated, and the diversified channel layout will drive growth. Considering the company's increased spending and industry competition intensified, we lowered 24-25 year net profit to mother to 3.75 million yuan and 426 million yuan (previous values were 4.00 million yuan and 471 million yuan), and increased 26-year net profit of 476 million yuan. The 24-26 profit growth rates were 14.7%, 13.4%, and 11.8%, corresponding PE was 16, 14, and 13 times, respectively. Considering the company's declining valuation, the increase in industry penetration rate drove growth, and maintained a “buy” rating.
Core hypothetical risk: The penetration rate of smart clothes dryers falls short of expectations, and industry competition intensifies.