1H24 results are in line with our expectations

The company announced 1H24 results: 1H24 achieved revenue of 1.448 billion yuan, a year-on-year increase of 3.77%, net profit to mother of 0.221 billion yuan, an increase of 83.69% year-on-year, after deducting non-return net profit of 0.205 billion yuan, a year-on-year increase of 53.75%. The performance was in line with our expectations.

On a quarterly basis, the company achieved revenue of 0.681/0.766 billion yuan in 1Q/2Q24 respectively, +12.61/ -3.00% year-on-year, and net profit of 0.111/0.11 billion yuan, respectively, and +154.72/ +43.23% year-on-year respectively. The company announced an interim dividend of 0.27 yuan (tax included), and the 1H24 company's cash dividend ratio was 49.79%.

Development trends

1. Focus on kitchen and bathroom health, beauty and health categories, and achieve rapid growth in performance. 1) By business, the kitchen and bathroom business achieved revenue of 1.271 billion yuan in the first half of the year, an increase of 6.01%; the beauty and health business achieved revenue of 0.14 billion yuan, a year-on-year decrease of 0.42%, mainly affected by caliber adjustments. Revenue from emerging smart hardware products was included in the beauty and health category. During the reporting period, the company increased investment and continued efforts in technological innovation and product development. We believe that with the continuous implementation of product technology iteration results, it is expected to drive the company's performance to continue to improve. 2) By channel, overseas revenue was 1.063 billion yuan, up 15.51% year on year, and domestic revenue was 0.385 billion yuan, down 18.98% year on year. We believe that along with the subsequent recovery in domestic demand and consumption, it is expected to drive the company's performance growth.

2. The net interest rate is growing rapidly, and the expense ratio is well controlled. The company's 1H24 gross margin was 35.34%, +1.02ppt year over year. On the cost side, the company's expense ratio for the 1H24 period was 18.56%, year-on-year -0.88ppt. Among them, sales/management/R&D/finance expenses were 2.91%/9.38%/7.36%/-1.1%, respectively, -1.56/+0.46/+0.59/-0.37ppt. Compared with 1H23, investment income as a share of revenue increased 1.14ppt year on year (reduction in RMB depreciation), income from changes in fair value increased 1.44ppt year on year in revenue (decrease in unexpired foreign exchange contracts), and asset impairment losses increased 1.30ppt year on year in revenue. Under the combined influence, 1H24 net interest rate was 15.28%, +6.65ppt year over year.

3. Continue to deepen the IDM sharing platform strategy, and the integration of kitchen, bathroom, beauty and health is developing rapidly. 1) Kitchen and bathroom business: At present, the company has broken through the limitations of a single product and stepped up efforts to develop intelligent, healthy, and green integrated kitchen and bathroom spaces. We believe that intelligent linked kitchen and bathroom spaces are the company's development and innovation direction. We believe it is expected to promote product structure upgrading and drive overall gross margin increase; 2) Beauty and health business: The company continues to increase investment in R&D and continue to promote product innovation and development. At the same time, the company actively expands diverse customers to ensure rapid business development, and the transformation of the company's new projects and new customer development has made certain progress. We believe that subsequent product and customer innovation will further drive the company's performance growth.

Profit forecasting and valuation

The 2024/2025 profit forecast remains unchanged, and the current stock price corresponds to 14/11 times P/E for 2024/2025. Maintain an outperforming industry rating. Considering the current decline in market risk appetite, the target price was lowered by 13% to 20 yuan, corresponding to 17/14 times P/E in 2024/2025, with 23% upside compared to the current stock price.

risks

Prices of raw materials fluctuate greatly, exchange rates fluctuate greatly, and global macroeconomic fluctuations.