Key points of investment
Founded in 1999, REALT has formed a product system including bathroom flushing system product solutions with water-saving flush components as the core, smart bathroom product solutions with smart toilets as the core, same-floor drainage system product solutions, age-appropriate bathroom product solutions, smart connectivity solutions for bathroom spaces, and overall bathroom assembly solutions. The company's products gradually expanded from water devices to smart home products. The company's revenue in 2023 was 2.84 billion, +11.47% year over year.
The company has now formed an ODM+ private brand dual-drive model. 1) In terms of ODM, the company is engaged in water parts foundry and smart toilet foundry. Through long-term and stable cooperation with high-quality customers while continuously developing new customer models, the company is expected to continue to grow in smart toilet foundry. 2) In terms of its own brand, the company began developing its own brand in 2021, gradually increasing its sales scale, and forming a market position for cost-effective smart bathroom products. Currently, the share of the company's export business revenue is gradually declining, and the business structure is more balanced.
The company has accumulated deep experience in smart toilets, opening up a second growth curve. The penetration of smart toilets has accelerated, and the company has stepped up its layout efforts. The company has a professional, strict, and complete in-house system from smart toilet R&D and design, to manufacturing, to quality control, and after-sales service, and continues to update and iterate products. In 2022, the company's smart toilet and cover business revenue was 1.06 billion yuan, +17.66%; in 2023, the smart toilet and cover revenue was 1,266 billion yuan, +25.90% year-on-year, and the smart toilet business continued to grow rapidly.
The company's product positioning is cost-effective, and the online channel has achieved a breakthrough in domestic production. 1) Product side: The company's smart toilet products are cost-effective and cover a full range of prices. The light smart series with a price range of less than 2000 yuan includes A1, S1, S1P, M2, etc.; cost-effective F3 model products with a price of no more than 3,000 yuan; UX series, A60 models, etc. with a high-end price range. 2) Channel side: In terms of offline channels, it is divided into engineering channels connecting hotels and real estate, and regional entry channels for new home appliances KA (such as Suning Tesco, Jingdong stores, etc.). In terms of distribution channels, the company currently has more than 500 distribution outlets in the coastal and central regions, mainly in the form of 1V1 stores; in terms of online channels, mainly on Douyin, Tmall, and Jingdong e-commerce platforms, using directly managed official flagship stores as sales channels, the company continues to increase online traffic and launch new products, while controlling the cost to sales ratio and maintaining stable profitability.
Profit forecast and investment rating: The company is a leading domestic foundry for bathroom components. It developed its own smart toilet brand in 2021, and has formed a market position for cost-effective smart bathroom products. The company's current brand awareness and market share continue to increase through online and offline omni-channel layout, while at the same time accelerating development. Currently, the company's offline building materials and bathroom stores and the new KA channel for home appliances are rapidly expanding, and the OEM business is developing steadily. We maintain our estimated net profit to the mother in 2024-2026 of 2.86/3.47/422 million yuan, respectively. The corresponding PE is 17X/14X/12X, maintaining an “increase in holdings” rating.
Risk warning: risk of fluctuations in downstream demand, risk of increased market competition, risk of large fluctuations in raw material prices, risk of product development and technological innovation.