Description of the event
The company disclosed its 2024 quarterly report: In Q1 of 2024, the company achieved revenue of 12.702 billion yuan, a year-on-year increase of 10.61%, the main business revenue reached 11.859 billion yuan, a year-on-year increase of 14.91%, realized net profit of 467 million yuan, a year-on-year decrease of 24.81%, and realized net profit without return to mother of 388 million yuan, a year-on-year decrease of 21.92%.
Incident comments
Domestic and foreign sales, steady growth in Q1 revenue, optimistic about the company's global competitiveness. The company achieved revenue of 12.702 billion yuan in Q1 2024, an increase of 10.61% year-on-year. In terms of domestic sales, the overall price growth and decline trend of the Q1 industry in 2024 is still clear. According to Aowei Cloud retail monitoring data, the color TV online/offline sales volume changed -3.1%/-7.7% year on year, and the average price changed +24.3%/+14.5% year on year, respectively, driving sales to change +20.4%/+5.5% year on year respectively. Looking at the Hisense brand matrix, Hisense, Vidda/ Toshiba's online sales volume changed by -6.46%/+6.21%/+22.76% year on year, respectively. 21.53 %/ +11.37%, offline sales volume changed by -0.09%/+8.24%/+1205.16%, respectively, and the average price changed +16.06%/+18.84%/+13.01% year over year, respectively, driving Hisense's overall online/offline sales volume to change 20.14%/17.24% year over year, respectively. In terms of export sales, according to DiXian data, mainland TV exports from January to January 2024 increased slightly by 0.4% year on year, and the cumulative export value increased 11% year on year. The company's export sales are also expected to grow steadily. From a long-term perspective, considering that the supply chain advantages of Japanese and South Korean brands are no longer strong and the competitive advantages of products are weakening, domestic brands such as Hisense are expected to continue to seize global market share, driving continued good revenue growth.
Cost fluctuations affect profit-side performance. In Q1 2024, the company's gross margin reached 15.76%, down 1.04pct month-on-month, down 2.41pct, or was mainly affected by the rise in panel prices. We estimate that in Q1 2024, the average monthly price of 65/55/50-inch LCD TV panels increased 38.07%/39.19%/31.22% year-on-year, while domestic online/offline sales of Hisense TVs increased 21.59%/14.97%, respectively. On the cost side, the company's Q1 sales, management, R&D, and finance rates reached 6.05%/1.66%/4.13%/0.19% respectively, with year-on-year changes of -0.59/-0.22/-0.37/0.14pct. The rate performance continued to be optimized under strong cost control. Under the combined influence, the company's net interest rate to mother reached 3.67%, down 1.74 pct year on year, net interest rate after deduction of 2.98%, down 1.24 pct year on year. According to Lotu Technology's forecast, the price of 43/55/65/75-inch panels in May is expected to rise by 1/2/3/3 US dollars, respectively, and 32/50/85/98 inch are expected to remain at April prices. Compared with the same period in 2023, it is expected that subsequent panel prices may stabilize, and cost pressure may be mitigated, compounded by the continuous improvement of the company's brand image, product structure upgrades, and strong rate control, and the company's profit performance is expected to improve steadily.
Investment suggestions: Structural demand for large screens, high-end, and new displays has emerged in the TV industry in recent years, bringing opportunities to display companies with technology accumulation, high product quality and cost ratio, and good brand base; the company's shareholder Hisense Electronics Holdings has implemented mixed ownership reforms through the introduction of war investment methods and introduced equity incentives, and the institutional mechanism has been greatly optimized. On this basis, the company has increased its brand volume through the launch and introduction of brands with different positions, and based on its deep accumulation in the ULEDX product system, the company has strong advantages in the high-end large-screen market, achieving a continuous increase in domestic and overseas market share, and operating efficiency has also been optimized. The company ushered in a new stage of accelerated scale growth and increased operating profit margins. We expect the company's net profit to be 24.41, 28.41 and 3.32 billion yuan respectively in 2024-2026, corresponding PE is 14.85, 12.76 and 10.91 times, maintaining a “buy” rating.
Risk warning
1. The risk of fluctuations in raw material prices;
2. Uncertainty brought about by changes in demand trends and competitive landscape.