1H24 results are in line with our expectations
The company announced 1H24 results: 1H24 achieved revenue of 0.862 billion yuan, a year-on-year increase of 0.03%, net profit to mother of 0.123 billion yuan, a year-on-year decrease of 4.43%, after deducting non-return net profit of 0.113 billion yuan, a year-on-year decrease of 8.63%. The results were in line with our expectations.
On a quarterly basis, the company achieved revenue of 0.381/0.481 billion yuan in 1Q/2Q24 respectively, +10.06%/-6.71% year-on-year, and net profit of 0.052/0.071 billion yuan, respectively, and +9.82%/-12.71% year-on-year respectively. At the same time, the company announced that it plans to pay a dividend of 0.3 yuan per share (tax included), for a total cash dividend of 0.115 billion yuan, and a cash dividend ratio of 93.44%.
Development trends
1. Breakthroughs have been achieved in product development, and the launch of new products has become the focus of the market. The company 2Q24 launched a new series of beauty cabin bath products. This product uses temperature control technology and built-in phototherapy technology to allow users to experience skin care effects during bathing and promote product innovation and upgrading. In addition, the company also launched Oppo MAX Air Conditioner, AI Thermostatic Bathtub, and Air Air Conditioner Series for the kitchen, continuing to enrich the product matrix. We believe that the continuous technical iteration of the company's products is expected to drive the company's performance to improve.
2. The gross margin remained stable, and the cost ratio increased. The company's 1H24 gross margin was 46%, -0.53 ppt year over year. On the cost side, the company's expense ratio for the 1H24 period was 30.87%, +3.36ppt. Among them, the sales/management/R&D/finance expenses rates were 19.9%/6.95%/5.74%/-1.72%, respectively, +2.38pp/+0.53pp/+0.41pp/+0.04ppt. The increase in sales expenses was mainly driven by increases in employee remuneration and advertising expenses. Under the combined influence, 1H24 net margin was 14.29%, -0.67ppt year over year.
3. The trade-in policy is expected to stimulate consumer demand and boost subsequent performance. Recently, Hubei, Jiangsu, Qinghai and other provinces issued trade-in subsidy rules, expanding the scope of subsidies from the original automobiles and household appliances to home improvement, kitchen and bathroom. We believe that the implementation of consumer promotion policies is expected to improve household demand. The company's bathtub and kitchen air conditioning categories are expected to benefit from this round of subsidies. In the future, as other provinces follow up and implement subsidies, it is expected to drive the company's performance to gradually recover.
Profit forecasting and valuation
The 2024/2025 profit forecast remains unchanged, and the current stock price corresponds to 11/10 times P/E 2024/2025. Maintain an outperforming industry rating. Considering the current decline in market risk appetite, the target price was lowered by 25% to 12 yuan, corresponding to 14/12 times P/E in 2024/2025, with 22% upside compared to the current stock price.
risks
The expansion of new categories fell short of expectations, industry competition intensified, and the development of dealer channels fell short of expectations.