Description of the event
The company disclosed the 2023 annual report & 2024 quarterly report: The company achieved revenue of 3.153 billion yuan in 2023, a year-on-year decrease of 4.64%, realized net profit of 109 million yuan, a year-on-year decrease of 42.93%, realized net profit deducted from non-return mother of 100 million yuan, a year-on-year decrease of 44.39%; achieved revenue of 716 million yuan in Q1, an increase of 7.69% over the previous year, and achieved net profit of 0.23 million yuan, an increase of 0.32% year on year .
Incident comments
Domestic demand is rationally combined with business focus. Revenue declined in 2023, and the year-on-year growth rate of 2024Q1 revenue recovered. The company's revenue in 2023 was -4.64% year-on-year. By business, the home environment category, water health category, personal health category and lifestyle category achieved revenue of 13.89/11.64/5.75/ 0.04 billion yuan respectively, with a year-on-year change of -10.22%/+10.31%/-1.38%/-95.72%. The domestic small household appliance market growth rate slowed significantly in 2023. In addition, the retail volume of cleaning appliances/kitchen appliances/water purification household appliances was -0.5%/-1.8%/+8.6%, respectively. In addition, the company actively focused on core brands and categories, The gradual reduction of business investment in non-core categories of brands such as “Vantage” corresponds to a large decline in revenue. If the impact of this sector is excluded, the company's revenue was -1.7% year over year; by region, the company's domestic sales ratio was -10.06%, and export sales were +29.77%. The impressive export sales growth rate was mainly due to the company actively exploring overseas markets based on a global strategy and in-depth analysis of local habits to launch competitive products.
2024Q1's revenue was +7.69% year-on-year, returning to positive growth. Overall business conditions improved, and domestic and foreign sales are expected to increase.
In 2023, structural improvements+cost reduction and efficiency led to an increase in gross margin. Increased cost investment put pressure on performance, and the 2024Q1 profit side improved. In 2023, the company's gross margin reached 30.76%, +1.27pct compared to the same period, as a result of an increase in the share of overseas channels with high gross margin, an increase in the share of water purification appliances with high gross margin, and the company actively promoted lean manufacturing to reduce costs and increase efficiency. The company's sales, management and R&D expenses were +18.66%/+4.29%/+23.55%, respectively, and the corresponding rates reached 19.32%/4.49%/4.79%, with a year-on-year change of +3.79/+0.38/+1.09pct. In 2023, the company adhered to the strategy of technological innovation and rapid iterative product upgrading. At the same time, the number of R&D personnel reached 445 at the end of the period, +10.42%. At the same time, in the face of increased homogenization of small household appliances, the company carried out marketing activities such as active traffic delivery, content promotion, and consumer guidance. In 2023, the company's net profit margin reached 3.53%, -2.42pct year on year. Combined revenue declined slightly, and net profit to mother was -42.93% year-on-year. 2024Q1's gross margin reached 30.86%, +1.36pct year-on-year. Sales, management, R&D, and financial rates were +2.48/ -0.21/+0.74/-0.77pct, respectively. Investment in sales and R&D continued to rise year over year, and financial expenses declined or benefited from exchange rate fluctuations; the corresponding net income ratio reached 3.26%, -0.23pct year on year, and +2.26pct month-on-month, combined with revenue growth factors, net profit attributable to mother +0.52% year over year.
Investment suggestions: The company focuses on emerging consumer electronics categories, and builds a brand matrix for different market positions, target customer groups and business models, covers different categories through different brands, penetrates and deeply explores corresponding consumption scenarios, accurately grasps changes in consumer demand, and continuously launches popular products with rapid response product design and development capabilities and accurate online marketing capabilities to guarantee the company's performance growth. Subsequent companies are expected to continue deepening the “Del Mar+ Philips” two-wheel drive strategy, and R&D and sales investment are expected to pay off from a long-term perspective. We expect the company's net profit to be 1.67, 2.03, and 241 million yuan respectively in 2024-2026, maintaining a “buy” rating.
Risk warning
1. Operating risks caused by fluctuations in consumer consumption during the economic recovery phase; 2. Risk of reduced profit efficiency due to increased market competition.