Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 8.96 billion yuan, an increase of 24.7% year over year (compared to 23H1 adjusted caliber, including Hefei home appliances, same below); net profit to mother was 0.56 billion yuan, up 32.7% year on year; after deducting non-net profit of 0.56 billion yuan, an increase of 42.2% year on year. Looking at a single quarter, the company achieved revenue of 4.76 billion yuan in Q2, up 24.9% year on year; net profit to mother 0.33 billion yuan, or 36.1% year on year; net profit after deducting 0.33 billion yuan, up 48.8% year on year.
Export ODM drives growth. By business entity, the revenue of Omar refrigerators/Hefei home appliances was 6.56 billion yuan/2.45 billion yuan respectively, up 26.2%/23.7% year on year; by product, the company sold 8.34 million units/1.659 million units respectively in the first half of 2024, up 22.9%/46.5% year on year, respectively, exceeding the industry growth rate of 8.2 pp/34.7 pp, respectively, and achieved revenue of 7.61 billion yuan/ 1.28 billion yuan, up 21.7%/46.3% year on year respectively; in the first half of 2024, the company achieved revenue of 2.31 billion yuan/6.65 billion yuan, respectively, -1.8%/+37.7%, respectively. Affected by factors such as low overall base in the same period last year, combined with the implementation of domestic trade-in subsidies, low overseas inventory, and active preparation of goods by buyers in some countries and regions, etc., export ODM orders increased rapidly, driving the company's revenue growth.
Changes in product structure have led to a decline in gross margin and a steady decline in cost ratios. The company's consolidated gross margin for the first half of 2024 was 23%, a year-on-year decrease of 5.2 pp. By product, the gross margins of the company's refrigerator (freezer) products/washing machine products in the first half of 2024 were 24.9%/-0.83pp, respectively; judging from the cost ratio, the company's sales/management/R&D expenses ratio in 2023 was 3.6%/3.5%/3.2%, respectively, -0.3 pp/-0.2 pp/pp, respectively. The overall cost ratio remained stable during the period. The net interest rate was 13.5%, down 3.1 pp year on year. The decline in net interest rate was mainly affected by the decline in gross margin, and the gross margin of the single category remained basically unchanged Stable. The decline in overall gross margin level is mainly due to changes in product structure.
The brand's business is developing well. In the first half of 2024, sales of TCL brand washing machines in the domestic market climbed from fifth at the end of last year to third in the industry. TCL brand refrigerators temporarily ranked sixth in the domestic market. Hefei home appliances remained in the top two in the Thai all-in-one washing and drying machine market, while in the Philippine roller market, Hefei home appliances steadily ranked first. The company maintained an industry-leading level in terms of R&D technology, process design, product quality, manufacturing costs, and operating efficiency.
Profit forecasting and investment advice. The company changed its name to “TCL Smart Home” and adjusted its business position to clarify the company's development direction for all categories of smart home appliances. In the future, it is expected that it will continue to enrich the household appliances category and contribute to growth momentum. The company's 2024-2026 EPS is expected to be 0.87 yuan, 1.04 yuan, and 1.20 yuan respectively, maintaining a “holding” rating.
Risk warning: risk of a rebound in raw material prices; risk of overseas demand falling short of expectations; risk of exchange rate fluctuations.