Investment advice: Due to tax rebates and increased performance, we raised our 2024-2026 profit forecast. We expect EPS to be 20.31/24.03/28.23 yuan in 2024-2026 (original value was 19.66/23.56/28.02 yuan, up +3%/+2%/+1%), with a growth rate of +30%/+18%/+17%. Refer to comparable companies in the same industry and give the company 25x PE in 2024, raise the target price to 507.63 yuan to maintain the “gain” rating.
Incident: Stone Technology issued an announcement “Notice on Wholly-owned Subsidiaries Recognized as Key Software Enterprises Encouraged by the State”, announcing that Stone Innovation, a wholly-owned subsidiary of the company, has been certified as a “Key Software Enterprise Encouraged by the State” and can apply for an exemption from corporate income tax in 2023.
Key software companies are certified, and tax rebates enhance performance: According to the rules, they are exempt from corporate income tax from the first year to the fifth year (2019 to 2023), and corporate income tax is levied at a 10% reduction rate for each subsequent year. The subsidiary Shitou Innovation's 2022/2023 net profit was 46.027 million yuan (accounting for 35%/44% of the consolidated net profit, respectively). According to the 2023 tax rate of 15% (according to the company's 2023 announcement), it is expected to receive a tax refund of 150 million yuan in 2024. According to the rules, taxes are expected to be paid at 10% in 2024.
618 sales increased, leading position consolidated: According to Aowei's online data, sweepers/floor scrubbers promoted sales of 805/381 million yuan in the first week (platform+professional e-commerce), reaching 36%/25% of 618's total sales in '23, respectively, and the industry is very popular. The market share of Stone/Covas/Cloud Whale/Pursuit was 34%/22%/20%/16%, respectively (28%/36%/11%/13% throughout the 618 years). Stone Technology has ranked first in terms of market share, and domestic sales performance in Q2 is highly certain.
Risk warning: There is uncertainty about the potential impact of tariffs on costs and the expansion of new channels.