Description of the event

The company disclosed the 2023 annual report & 2024 quarterly report: The company achieved revenue of 15.502 billion yuan in 2023, up 1.16% year on year, realized net profit of 612 million yuan, down 63.96% year on year, realized net profit deducted from non-return mother of 484 million yuan, down 70.26% year on year. Among them, Q4 2023 achieved revenue of 4.971 billion yuan, a year-on-year decrease of 98.54%, and realized net profit without return to mother of -38 million yuan, year on year Decreased by 107.38%; Q1 of 2024 achieved revenue of 3.474 billion yuan, a year-on-year increase of 7.35%, realized net profit of 298 million yuan, a year-on-year decrease of 8.71%, and realized net profit without return to mother of 287 million yuan, an increase of 0.26% over the previous year.

Incident comments

Domestic sales are weak, and export sales are better, and the company's overall revenue continues to grow. The company's revenue in 2023 was +1.16%. Among them, Covos brand service robots achieved revenue of 7.681 billion yuan, accounting for 49.55%, revenue down 1.49% year on year, domestic revenue decreased 11.60% year on year (online -21.00%, offline +21.89% year over year), overseas revenue increased 20.1% year on year; Tianke brand smart household appliances achieved revenue of 7.271 billion yuan, accounting for 46.90%. Revenue increased 5.24% year on year, domestic revenue decreased 10.92% year on year (-2.69%, online) (Below -28.10% YoY), overseas revenue increased 40.5% year over year.

On the one hand, the overall recovery of the domestic consumer market was weak in 2023, and the company's overall revenue in the domestic market fell 11.43% year on year; on the other hand, the company continued to increase its overseas market expansion efforts and set up overseas headquarters in Singapore. The Covos brand recorded positive growth in all major overseas business regions. The Tianke brand entered more than 1,800 Target stores in the US, and maintained the leading position in floor washer sales in various markets such as Amazon in the US and Germany. The company's overall overseas revenue increased 25.76% year on year. In 2024, the company's revenue increased 7.35% year-on-year. According to Aowei Cloud retail monitoring data, in Q1 of 2024, domestic online/offline sales of vacuum cleaners were +29.97%/+40.96% YoY, and online/offline sales of floor scrubbers were +28.96%/+4.05% YoY.

Covos and Tianke brands are still ahead of other brands in domestic online and offline sales shares in corresponding categories.

The gross margin of domestic sales declined during the year, the sales expense ratio increased, and profit declined year-on-year. The decline in expenses in the first quarter of 2024 led to a steady recovery after deducting non-net profit. The company's gross margin reached 47.50% in 2023, 4.11pct year on year, mainly due to the introduction of new features in the reporting period due to the increase in material costs and the decline in average sales price during the same period, which led to a higher cost growth rate than the sales revenue growth rate; by region, domestic gross margin reached 44.37%, -10.81 pct year on year, overseas gross margin reached 51.81%, +7.16 pct year on year; by product, service robot gross margin reached 42.69%, y-2.20 pct year on year, and 52.79% on smart home appliances , -6.64pct year on year. In 2023, the company's sales, management and R&D expenses were +14.60%/-9.61%/+10.84%, respectively. The corresponding rates changed by +4.01/-0.45/+0.46pct, respectively. Sales expenses and rates increased significantly year-on-year, mainly due to the increase in after-sales maintenance costs and marketing and promotion expenses. Combined with the above factors, the company's net profit margin in 2023 reached 3.95%, -7.13pct year on year. 2024Q1's gross margin reached 47.17%, -3.50 pct year on year, and +0.71 pct month on month. Sales and management expense ratios decreased by 1.63 and 1.28 percentage points year on year, respectively, and non-net profit deducted by mother increased 0.26% year on year, gradually stabilizing.

Investment advice: The company's Covos service robots and Tianke smart household appliances have all obtained a good brand foundation, while continuing to promote new category layout and efficiency optimization. The company's net profit for 2024-2026 is estimated to be 1,4001, 16.83, and 1.989 billion yuan, corresponding to PE of 24.31, 20.24, and 17.13 times, maintaining a “buy” rating.

Risk warning

1. Macroeconomic fluctuations bring about changes in consumer spending intentions and disrupt company revenue; 2. Risk of fluctuations in company shares and profits due to increased market competition.