Incident 1: The company announced its 2023 annual report. In 2023, the company achieved revenue of 15.502 billion yuan, a year-on-year increase of 1.16%; net profit to mother during the same period was 612 million yuan, a year-on-year decrease of 63.96%.
Incident 2: The company announced its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 3.474 billion yuan, a year-on-year increase of 7.35%; net profit to mother was 298 million yuan, a year-on-year decrease of 8.71%.
Domestic sales were phased under pressure in 2023, and the revenue growth rate in the first quarter was corrected. By business, the Covos brand/Tianke brand/OEM business achieved revenue of 76.81/72.71 billion yuan in 2023, respectively, -1.5%/+5.2%/-5.9% year-on-year. By region, the company's domestic sales and export sales in 2023 achieved revenue of 89.80/6.522 billion yuan, respectively. Among them: ① In terms of domestic sales, domestic revenue for the Covos/Tianke brand was -11.6%/-11.0% year on year. Among them, the decline in Covos revenue was mainly due to the company's short-term lack of product layout in the lower price segment. The decline in domestic revenue of Tianke was mainly due to increased competition in the industry leading to a decline in average price and a short-term decline in revenue due to offline channel adjustments. ② In terms of export sales, the foreign revenue of the Covos/Tianke brand was +20.1%/+40.5% year-on-year respectively in 2023. The company actively developed key overseas markets and improved the local channel layout. Covos's European market revenue increased by 40.5% year on year, and Tianke had already entered more than 1,800 Target offline stores by the end of 2023. In the first quarter of 2024, the company's revenue increased 7.35% year on year, and the growth rate in the single quarter was corrected. According to statistics from Aowei Cloud Network, the total online revenue of Covos sweepers and floor washers (excluding Douyin) increased 5% year-on-year during the same period.
Profits declined in 23 due to falling average prices and increased investment in new businesses, and profits gradually recovered in the first quarter of '24. In 2023, the company's gross margin was 47.50%, down 4.1 pct year on year. Among them, the gross margin of service robots/smart household appliances decreased by 2.2/6.6 pct year on year, respectively. It is estimated that the average product price declined mainly in the context of increased competition in the industry, and the company's new business also dragged down gross margin. The company's expense ratio increased by about 4.6 pct year on year during the same period. Among them, the sales expense ratio increased by about 4.0 pct year on year, mainly due to the increase in the company's after-sales maintenance costs and marketing and promotion expenses. In 2023, the company's net profit margin was 3.95%, down 7.1pct year-on-year. The company's gross profit margin and net interest rate for the first quarter of 2024 were 47.17% and 8.57%, respectively, -3.5/-1.5pct year-on-year, and +0.7/+8.4pct month-on-month respectively. The company's cost control effect was remarkable, and the net interest rate level improved significantly compared to the second half of 2023.
Appropriately adjusting the revenue growth rate of Covos and Tianko businesses, and adjusting the gross margin and sales expense ratio assumptions, we forecast the company's net profit to be 13.91/16.83/1,913 billion yuan in 2024-2026 (previously predicted 2024-2025 was 1,284/1,594 billion yuan), giving DCF a target valuation of 61.61 yuan, maintaining a “buy” rating.
Risk warning
R&D innovation falls short of expectations; risk of increased competition in the industry.