Description of the event

The company disclosed the 2023 annual report & 2024 quarterly report: The company achieved revenue of 1,673 billion yuan, a year-on-year decrease of 8.8%, achieved net profit of 464 million yuan, a year-on-year increase of 2.68%, realized net profit of 436 million yuan, an increase of 3.04% over the previous year, of which Q4 achieved revenue of 411 million yuan, a year-on-year decrease of 5.73%, realized a net profit of 101 million yuan, an increase of 26.89% over the previous year; the company achieved net profit without return to mother of 75 million yuan, an increase of 31.84%; the company 2024Q1 achieved revenue of 273 million yuan, a year-on-year decrease of 19.39%, realized net profit of 77 million yuan, a year-on-year decrease of 23.34%, and realized net profit without deduction of 77 million yuan, a year-on-year decrease of 22.93%. In addition, the company will distribute a cash dividend of 7.50 yuan (tax included) for every 10 shares to all shareholders in 2023.

Incident comments

Real estate suppressed new demand in the industry, and the company's revenue scale declined at a stage. The company's revenue in 2023 fell 8.8% year on year, mainly due to the overall decline in the integrated stove industry affected by real estate: according to data from the National Bureau of Statistics, the domestic sales area of commercial housing in China fell 8.2% year on year in 2023, and the downturn in the real estate sector suppressed new demand in the market and had a major negative impact on demand for kitchen appliances. In 2023, retail sales of integrated stoves in China were 24.9 billion yuan, down 4% year on year, and retail sales volume was 2.78 million units, down 4.2% year on year. The company's 2024Q1 revenue fell 19.39% year on year. According to Aowei Cloud Network (AVC) summary data, the omni-channel retail sales volume of the 2024Q1 China integrated stove fell sharply by 28.1% year on year, and retail sales fell sharply by 30.3% year on year. The overall industry was relatively affected by the external environment, and the company's overall revenue performance was superior to the industry level.

2024Q1 quarterly revenue declined, expenses were relatively rigid, and profits were under pressure in the short term. In 2023, the company's gross margin was 47.1%, up 2.99 percentage points year on year. The company's gross margin repair was mainly due to a decrease in the price of some raw materials, and the company continued to optimize the digital factory platform to achieve intelligent, automated and visual operation of the whole process, effectively improving production efficiency and product yield; in terms of cost ratio, the company's sales expenses rate decreased by 0.68 pct year on year in 2023, management expense ratio increased 0.06 pct year on year, and R&D expense ratio increased 0.09 pct year on year. It is worth noting that the company's asset impairment losses and credit reduction were The significant increase in value loss may be due to the company's assessment of the increased risk of downstream real estate customers, and a large number of contract performance cost impairment losses and bad debt losses. Combined, the company's operating profit in 2023 (gross profit - taxes and additional - sales & management & R&D expenses + credit and asset impairment losses) was 451 million yuan, an increase of 1.94% year on year; on this basis, the company's 2023 financial expense ratio was optimized by 0.86 pct year on year, mainly due to the increase in interest income, which ultimately increased the net profit margin to mother by 3.1 pct to 27.76% year on year. 2024Q1's gross margin was 46.16%, down 0.78pct year on year. Sales/management/R&D/finance expense ratios were +1.05/+0.97/+0.25/ -0.67pct year on year, respectively. Among them, the amount of sales, management, and R&D expenses all declined. Therefore, the increase in the cost ratio during the period was due to a decline in revenue scale, which ultimately led to a decrease of 1.46 pct to 28.26% year on year.

Investment advice: As a pioneer and leader in the field of integrated stoves, the company always adheres to product technology innovation and actively promotes the upgrading of products to intelligent high-end to better meet user needs. Despite the phased decline in the company's revenue due to disturbances in the external environment, the company still maintains a leading position in the industry, actively explores multi-channel and multi-form matrix marketing, and promotes the operation of the Meida and Tianniu brands, which is expected to increase consumer coverage and demand targeting, which is conducive to the recovery of the company's size and profit. We expect the company's 2024-2026 net profit to be $475, 504, and 542 million yuan, respectively. Corresponding PE valuations are 12.32, 11.62, and 10.80 times, respectively, maintaining a “buy” rating.

Risk warning

1. Risk of fluctuations in demand for kitchen appliances due to fluctuations in the real estate market; 2. Decline in market share and profitability due to increased market competition.