Profit margins are under pressure, export sales have recovered significantly, and “purchases” have been maintained.

On July 24, the company released a performance report. 24H1 achieved revenue of 10.965 billion yuan, +9.84% year over year; realized net profit of 0.941 billion yuan, +6.81% year over year; realized net profit deducted from non-mother 0.923 billion yuan, +7.62% year over year. Among them, Q2 achieved revenue of 5.586 billion yuan, +11.29% year over year; realized net profit of 0.471 billion yuan, +6.40% year over year; realized net profit deducted from mother of 0.462 billion yuan, +7.18% year over year. Due to the complex consumption environment and rational consumer demand, we adjusted the company's 24-26 EPS to 2.91, 3.24, and 3.61 yuan, respectively (previous values: 2.99, 3.30, 3.64 yuan). According to Wind's unanimous expectations, the average PE of comparable companies in 2024 was 17x. As a leading small home appliance company, the company may expand its product line through continuous innovation and investment to further increase its market share. The company was given 19x in 2024, corresponding to 55.29 yuan (previous value: 65.78 yuan), maintaining a “buy” rating.

Domestic sales performance was superior to the industry level. The restorative growth in export sales was significant, and 24H1/24Q2's revenue was +9.84%/+11.29%, respectively. Looking at the Q2 year-on-year growth rate by quarter, the year-on-year growth rate improved month-on-month (Q1 revenue +8.38% year over year). In terms of domestic and foreign sales, the 24H1 domestic small household appliance industry's prosperity declined. According to Aowei Cloud Network, the 24H1 domestic online retail sales of small household appliances was 110.53 billion yuan, -3.3% compared with the same period last year. Under pressure from the external environment, the company still achieved year-on-year growth in domestic sales revenue with new product innovation and channel advantages, and achieved better performance than the industry average; moreover, the company's online/offline market share of core categories increased. In terms of export sales, thanks to the recovery in demand after inventory removal, orders from the company's main export customers increased significantly, and export business revenue increased significantly over the same period last year.

Gross margin is under pressure, and the company actively controls fees to guarantee profits

24H1/24Q2 companies' net profit to mother was +6.81%/+6.40%, respectively, and Q2 profit growth slowed down (Q1 net profit to mother +7.23% YoY). Mainly due to the decline in the market competition environment where consumption is weak, the average price of small household appliances has declined, and the company's actual gross margin is under pressure. According to Aowei Cloud Network, the average price of 24H1 domestic small household appliances online was 179 yuan, -5.7% compared with the same period last year. In order to guarantee profits, the company takes active cost control measures, continuously improves marketing efficiency and strictly controls all expenses.

Consumer demand is biased towards rationality, and innovation may become a strong competitive force

According to data from the National Bureau of Statistics, the total retail sales value of social consumer goods from January to June this year was 23.6 trillion yuan, +3.70% compared with the same period last year. Under current consumption trends, consumer consumption is biased towards rationality, especially for non-essential appliances such as small household appliances. Therefore, we believe that innovative and cost-effective products will be favored by consumers. As a leading small household appliance company, the company continued to increase investment in R&D and innovation at 24H1, diversified and youthful new products such as far-infrared rice cookers, mini espresso machines, and double roller brush whole-house self-drying floor scrubbers. In the future, the company is expected to further increase its market share and build core competitiveness with innovative products.

Risk warning: increased market competition; risk of high inflation overseas; risk of new products falling short of expectations.