Incident: The company released its 2023 annual report and 2024 quarterly report. It achieved revenue of 1,688 billion yuan for the full year of 2023, +22.16% year over year; realized net profit of 327 million yuan, +49.71% year over year, and plans to distribute a cash dividend of 0.3 yuan (tax included) per share. 2024Q1 achieved revenue of 292 million yuan, +5.73% year over year, and net profit to mother of 56 million yuan, +15.07% year over year.
Comment:
Profits resumed rapid growth in 23Q4, and 24Q1 started steadily. In 2023, the results of the company's channel reform were gradually released and new smart home products were released, and operations gradually resumed. Among them, the 2023Q4 company achieved revenue of 572 million yuan, +53.05% year-on-year, and net profit of 89 million yuan to mother, +92.11% year-on-year, driven by a low base and large consumption promotion during the same period. By category, the company's product structure upgrade trend continues. Smart home product revenue for the full year of 2023 was 1,433 billion yuan (+26.39% year over year), accounting for nearly 85% of total revenue, an increase of 3 pcts over 2022. The 24Q1 company achieved steady revenue growth against the backdrop of a weak recovery in the overall consumption environment and a high base in the same period last year. Improving quality and efficiency on the operating side led to rapid profit side growth, which fully reflected the improvement in the company's overall operating efficiency after channel optimization.
Product and channel structure optimization, profitability improvement. In 2023, the company's gross margin was +4.98pct to 51.35% year over year. We think the main reason is product and channel structure optimization; sales/management/R&D/finance cost ratios were +1.66/-0.38/ -0.02/+0.05pct to 20.33%/5.17%/3.15%/-0.48%, respectively. Among them, the increase in sales expenses is expected to be mainly affected by the increase in offline and e-commerce promotion expenses, which together led to a net margin of +3.55pct to 19.36% year over year. 24Q1 gross profit margin of 51.94% (YoY +6.22pct), net profit margin 18.98% (YoY +1.52pct), continuing the trend of improving profitability.
Offline channels were repaired quickly, and omnichannel gross margin increased. In 2023, the company achieved revenue of 1,06/3.82/283 million, compared to +19.38%/+22.50%/+32.42%. Among them, the company actively expanded diversified e-commerce channels and increased product and brand promotion. E-commerce channels maintained rapid growth throughout the year. The results of offline channel reform gradually became apparent, and revenue in the South and North regions achieved high revenue growth throughout the year; and operational efficiency increased simultaneously. The company's e-commerce, South District/North District respectively achieved gross profit margins of 53.92%/47.70%/47.65%, year-on-year + 5.45pct/+4.08pct/+5.92pct. It is expected that in the future, the company's online and offline omni-channel integration will further show results, helping the company's operations continue to improve.
Investment advice: The company is a leading enterprise in China's smart drying industry. It is actively expanding the smart home circuit, continuously improving quality and efficiency on the supply chain side, and its competitive advantage continues to improve. We maintain the company's profit forecast. The company's net profit for 2024-2026 is estimated to be 4.09/494/593 million yuan respectively, corresponding to the current market capitalization PE of 15/12/10X, respectively, to maintain a “buy” rating.
Risk warning: New product development and channel reforms fall short of expectations, large fluctuations in raw material costs, etc.