Incident: In 2024, the company achieved revenue of 0.322 billion yuan, +0.22%, net profit to mother of 0.032 billion yuan, or -15.19%; of these, 2024Q2 achieved operating income of 0.163 billion yuan, +7.83% year over year, and net profit to mother 0.009 billion yuan, or -53.42% year on year. The company pays a cash dividend of 0.8 yuan (tax included) for every 10 shares to all shareholders.
Q2 Domestic sales growth rate recovered month-on-month, and export sales growth performed well
On the revenue side, domestic business revenue of independent brands was under pressure, and the growth rate of domestic sales in Q2 recovered from month to month; the expansion of overseas business of independent brands in terms of regions, channels, products, etc. was progressing normally; OEM/ODM business revenue continued to pick up as inventories of major customers recovered. By region, 24H1's own brand and OEM revenue were -6.5%/+31.91%, respectively. Among them, the domestic and foreign sales revenue of the private brand was -9.3%/+29.5%, and the export sales performance was better; 24Q2 private brand and OEM revenue were +2.6%/+31.3% year over year, respectively, of which domestic and foreign sales revenue of private brands were +0.1%/+30.6% year over year, and domestic sales recovered from month to month.
By category, 24H1's revenue from electrical appliances/supplies and foodstuffs was -6.92%/-5.51%, respectively, with revenue accounting for a relatively high proportion of steaming cookers/health pots being -15.22%/+3.67%, respectively; in the supplies and foodstuffs category, tableware, drinkware, and cookware, which account for a relatively high share of revenue, revenue was -7.09%/+18.13%, respectively.
Export profit margin increased year-on-year
In 2024, H1's gross margin was 48.96%, -1.83 pct year on year, and the net margin was 9.91%, year-on-year -1.8 pct; of these, 2024Q2 gross margin was 48.26%, year-on-year -1.49 pct, and the net margin was 5.73%, or 7.53pct year on year. By product, the gross margin of 24H1's own brand and OEM sales was -1.5/+8.9pct year on year; by region, domestic and foreign sales gross margins were -0.4/+5.5 pct year on year, respectively, and the gross margin of export sales increased significantly year-on-year.
The company increases domestic and foreign investment
The company's 2024 H1 sales, management, R&D, and financial expense ratios were 28.43%, 9.42%, 6.22%, and -1.1%, respectively, +1.11, -1.08, +0.03, and +0.76pct; of these, the 24Q2 quarterly sales, management, R&D and financial expenses rates were 33.18%, 8.63%, 6.37%, and -1.2%, respectively, +5.36, -2.17, +0.64, and +2.97pct. The 24H1 sales expense ratio increased year-on-year, mainly due to the year-on-year increase in employee remuneration, after-sales service and accessories (domestic and foreign after-sales service outsourcing), rental costs and logistics transportation costs; the year-on-year decrease in management expenses, mainly due to the year-on-year decrease in managers' employee remuneration; and the year-on-year increase in financial expenses, mainly due to the year-on-year decrease in exchange rate changes. Domestic and overseas businesses of independent brands have increased investment in marketing and promotion, product development, talent attraction and incentives, etc., which has had a certain impact on the Group's overall profit level.
The increase in the ratio of inventory, foundry revenue and distribution revenue affected the operating cash flow balance sheet. The company's 2024 H1 monetary capital+transactional financial assets were 0.53 billion yuan, -17.16% year over year, inventory was 0.122 billion yuan, -1.71% year over year. The total amount of notes receivable and accounts receivable was 0.03 billion yuan, +15.3% year over year. On the turnover side, the number of turnaround days for the company's inventory, accounts receivable, and accounts payable at the end of the H1 period in 2024 was 125.07, 14.75, and 43.98 days, respectively, -19.36, -3.37, and -1.43 days compared to the previous year. On the cash flow side, the company's net cash flow from H1 operating activities in 2024 was 0.007 billion yuan, -86.45% year over year, of which net cash flow from 2024Q2 operating activities was 0.009 billion yuan, or -5.25% year over year.
Operating cash flow decreased year-on-year, mainly due to: 1) increase in 24H1 inventory level; 2) increase in OEM/ODM business revenue and impact on payable period; 3) increase in revenue ratio through distribution business and impact on payable accounts receivable period.
Investment suggestions: On the revenue side, the construction of emerging channels for domestic sales of private brands is progressing in an orderly manner, and the export business model is gradually changing; on the cost side, revenue from export-owned brands optimizes profit levels through changes in channels and operating models. In the future, the company will also further promote efficiency and cost reduction, and wait for consumption to recover with more efficient operation and management. According to the company's interim report, we slightly lowered our gross profit margin. We expect net profit to be 0.076/0.088/0.102 billion yuan (previous value 0.098/0.113/0.129 billion yuan) for 24-26, respectively. The corresponding dynamic valuations are 33.3x/28.8x/25x, respectively, maintaining an “incremental” rating.
Risk warning: Private brand sales fall short of expectations; export orders fall short of expectations; rising raw material prices and rising freight rates have led to a decline in profits.