The company released its annual report for the year 23 and the quarterly report for the year 24

24Q1 revenue was 1.1 billion yuan, up 2%; 23A revenue of 7.6 billion yuan, an increase of 2%, and net profit to mother of 420 million yuan, a decrease of 28%; of these, 23Q4 revenue was 2.4 billion yuan, up 5%, and net profit to mother was 140 million yuan, a decrease of 20%. In 2023, the company's smart toilet revenue was 1.56 billion yuan, an increase of 12%, accounting for 20% of the total, and an increase of 2 pcts.

At the beginning of 2023, based on market judgment and competitive needs, the company accelerated new product development and improved product competitiveness, while adjusting sales policies accordingly, increasing omni-channel product promotion efforts to seize market share and accelerate internal cost reduction efforts; since the impact of price factors was higher than the contribution of cost reduction, it had an impact on gross margin and profit levels. The average price of 2024Q1 continued the 23Q4 price level, and domestic gross margin increased month-on-month but decreased year-on-year.

In 2023, the company plans to distribute a cash dividend of 130 million yuan (tax included), with a dividend rate of 30%; by product, 23A sanitary ceramics revenue of 3.7 billion yuan, an increase of 7%, a gross profit margin of 29%, and a decrease of 6 pcts; of these, the gross profit margin of smart toilets is 30%, a decrease of 6 pcts; the sales volume of sanitary ceramics 23A is 9.02 million units, an increase of 14%;

Leading hardware revenue was 2.1 billion yuan, up 2%; gross profit margin was 27%, down 4 pcts; sales volume was 15.73 million pieces, up 7%;

Bathroom furniture revenue was 800 million yuan, a decrease of 5%, gross profit margin of 27%, and a decrease of 5 pcts.

By model, 23A distribution revenue (including distribution and retail, e-commerce, home improvement and engineering) was 6.6 billion yuan, down 1%, gross profit margin of 27%, same reduction of 5 pcts; direct sales of 1 billion yuan, up 20%, gross profit margin 34%, same decrease of 5 pct; 23A's e-commerce revenue of 1.01 billion yuan, up 6.7%, of which direct e-commerce was 800 million yuan, up 15.3%; 23A home improvement channel revenue of 1.14 billion yuan, up 9.5% 9.4% .

The revenue of the 23A engineering channel was 1.88 billion yuan, an increase of 1.5%, of which the distribution project was 1.66 billion yuan, a decrease of 2%.

By region, domestic 7.5 billion, up 0.6%, gross profit margin 29%, same decrease of 4 pcts; overseas 130 million, up 238%. 24Q1 revenue increased year on year, but the overall share was still low.

By the end of 2023, there were a total of 17,567 terminal stores (the main types of growth outlets were home improvement stores and sinking channel outlets). In 2023, the company's distribution and retail (store) revenue was 2.95 billion yuan, a decrease of 3.47%.

The company's 24Q1 gross profit margin was 24%, a reduction of about 6 pcts, and a net profit margin of -8%, and a reduction of about 8 pcts.

Firmly adhere to the direction of intelligence and create a pioneering advantage of intelligence

Since developing smart toilets in 2006, the company has continued to promote smart home product research and development. With “smart life” as the main product line, it has successively launched smart products such as smart showers, smart bathroom mirrors, smart faucets, smart bathroom cabinets, and smart shower rooms, and continues to improve the smart bathroom category. In 2023, the company launched the “New Smart Life Proposal”, which is a combination of smart health technology, smart scenarios and other product packages, including X7 ZOOM smart toilets, H2 smart toilets, Eason Ethan series, MOON Yingyue series, DOMINO modular smart mirror cabinet, etc., which not only incorporates rich intelligent technology elements, but also deeply rooted in user-friendly design concepts, reflecting deep care for user experience.

Adhering to retail as the main focus, promoting omni-channel marketing, and building a balanced and reasonable sales channel structure, the company continues to push dealers to lay out empty sales areas, improve the layout of terminal stores, accelerate channel decline, expand sales coverage, build a more complete terminal marketing system with stronger radiation capacity within the region, achieve breadth and depth coverage of the market, and consolidate and increase market share.

In terms of e-commerce channel layout, the company has built its own e-commerce operation team and cooperated with e-commerce dealers for a long time to carry out direct e-commerce and dealer e-commerce business. To this end, the company formulated a “1+N” multi-store matrix strategy, that is, one official flagship store in all categories links with multiple category specialty stores, and all categories of flagship stores are used to showcase the company's most core competitive and technology-leading brand products; specialty stores fully segment product categories based on product function, product style and price range, and provide full-process professional services.

The company actively grasps changes in channel traffic, actively expands home improvement channels, and reaches strategic cooperation with leading national home improvement companies and is implemented by local dealers. At the same time, the company's regional service personnel collaborated with dealers to carry out activities such as “Home Improvement City Partners” to develop local small and medium-sized home improvement enterprises and provide special product solutions.

Adjust profit forecasts to maintain “buy” ratings

In 2024, the company will continue to improve product planning capabilities, build flagship products, and promote product line adjustments; accelerate new product launches and store upgrades, optimize the sales structure; accelerate channel decline and overseas exports, broaden sales channels, and continue to improve the omni-channel layout; accelerate cost reduction and efficiency efforts to enhance the company's profitability. According to the 23 annual report and the quarterly report for '24, considering the sluggish real estate data and weak consumer demand in the post-cycle, we adjusted the profit forecast. We expect net profit to be 4.8/5.6/670 million yuan respectively for 24-26 ($589/716 million before 24-25), and the corresponding PE is 18/16/13X, respectively.

Risk warning: Increased market competition; fluctuations in the real estate market and slowing consumer demand; risk of fluctuations in raw material prices.