The company's recent situation
We believe that stone sweepers have built up strong brand potential in overseas markets. Currently, the company is speeding up channel expansion in overseas markets to reap the dividends in overseas markets. At the same time, the company is also benefiting from the continued boom in the domestic sales market for sweepers, and the domestic sales growth trend is relatively good. The company recently set up a washing machine division. We believe that the molecular sieve washing and drying all-in-one machine promoted by the company may help the company grow in the second curve.
reviews
Overseas channels are expanding at an accelerated pace, and the company is in a dividend redemption period. At present, Stone has successfully formed a high-end brand image in overseas markets. Since this year, stone sweepers have taken advantage of strong brand power and outstanding product strength to accelerate the expansion of overseas channels. 1) US market: Stone began expanding offline channels last year. Recently, it has entered more than 1,400 Target stores and 695 BestBuy stores. We estimate that the coverage rate has reached 70% + of Target and BestBuy stores across the US. 2) Eurasian market: The company strengthens its channel layout through actions such as adding nationalized customers, refined dealers, and building its own channel dealers in some regions. We believe that the increase in market share in Southwest Europe, which has a low market share, the return of Amazon to direct management in Europe, and the continued upgrading of the overseas sweeper product structure will all contribute to revenue growth.
The domestic sales market benefited from the overall boom, and washing machines created a second growth curve. 1) The domestic sweeper industry has continued to boom since this year. During the 618 promotion period this year (5.20-6.23), online sweeper sales (including Douyin) were +17% year-on-year. The overall share of stone sweepers has remained stable, and the domestic sales growth trend is relatively good. 2) The company recently set up a washing machine division to coordinate resources to create a second curve. Currently, the company mainly promotes the all-in-one washing and drying machine with molecular sieve solutions. It is different from the condensing type and heat pump type common in the market, and has the distinctive characteristics of drying at low temperature. At present, the company has launched a total of 5 products. The H1 Air (2999 yuan) and M1Pure (1999 yuan) launched this year are considered to be cost-effective. We think washing machines may grow into the company's second business curve for domestic sales.
Sea freight and tariff factors disrupted in the short term and did not change the company's growth trend in the long term. Recently, the market is worried about the impact of rising sea freight charges and the expiration of US tariff exemptions on the company's performance. 1) The increase in shipping costs mainly affects the direct sales sector in the US and Europe. We estimate that according to the current trend in sea freight rates, the sea freight rate will increase by 25-30 million yuan in 2024 over the same period last year. 2) Tariff impact: We assume that 50% of the company's products in the US will be re-subject to additional tariffs of about 0.1 billion yuan throughout the year. However, we believe that the above calculation is based on single-factor changes, but there is a certain process. The third quarter is expected to be slightly affected, and the impact may be small in the long term.
Profit forecasting and valuation
We keep the company's profit forecast for 2024/2025 unchanged, and the current stock price corresponds to 18.3 times/15.2 times P/E for 2024/2025. The target price of 509.34 yuan remains unchanged, corresponding to 25.0 times/20.7 times P/E in 2024/2025, with 37% upside compared to the current stock price.
risks
Domestic and overseas market demand fell short of expectations; profitability declined.