Incident: The company released its 24-year semi-annual report. 24H1 achieved revenue of 0.862 billion yuan, +0.03% year over year; net profit to mother of 0.123 billion yuan, -4.43% year over year; and basic earnings per share of 0.32 yuan/share. Q2 achieved revenue of 0.481 billion yuan, -6.71% YoY; net profit to mother 0.071 billion yuan, or -13.41% YoY.
Overall performance remained steady. The real estate market continued to decline in the first half of '24, and demand in the home appliance market was sluggish. We expect the decline in revenue growth in Q2 to be mainly due to the impact of overall market demand and a drag on engineering channels after the decline in real estate completion, but the overall performance of 24H1 is still stable. By business, the 24H1 electrical business achieved revenue of 0.663 billion yuan, accounting for 77%, and a gross margin of 53%; the materials business achieved revenue of 0.176 billion yuan, accounting for 20%, and a gross margin of 22%. Among them, the electrical appliance business is still mainly driven by yuba and clothes dryer products.
R&D continues to lead product development, and profits remain at a high level. The company maintained and increased investment in R&D to consolidate its leading edge in core product categories. 24H1 invested 49.5021 million yuan in R&D expenses, an increase of 7.64% over the previous year, accounting for 5.74% of revenue. Judging from the profit level, the company's 24H1 achieved gross profit margin of 46%, -0.53 pct year on year; net profit of 14.55%, -1.86 pct year on year. From the cost side, the company's 24H1 sales/management/finance ratio was 19.90%/6.95%/-1.72%, compared with +2.38/+0.53/+0.04pct, respectively. We expect the increase in sales expenses to be mainly due to investment in promotion and the holding of new product-related activities. In addition, 24H1 achieved other revenue of 20.0511 million yuan, mainly due to software tax rebates and VAT credits.
Products are constantly being iterated to meet market needs. The 24H1 new beauty cabin bathtub integrates multiple functions such as full body light beauty, full bath deodorization and sterilization, and intelligent voice control to achieve the perfect integration of bathing and phototherapy beauty; Opp MAX Air Manager Hydrogen Bath is equipped with pioneering hydrogen peroxide deodorization and sterilization technology to achieve sterilization, deodorization and fresh air ventilation of the bathroom space. Continue to promote the integrated development of multiple channels. Among them, physical channels actively seek incremental opportunities in the sinking market, establish a complete public+private traffic matrix to boost e-commerce channels, refine control engineering channels, and focus on the quality of operation and repayment, while home improvement channels accelerate the layout of potential markets such as old housing renovation and partial renovation markets.
It is proposed to pay the first mid-term dividend, which highlights the long-term investment value. The company announced a profit distribution plan for the semi-year 2024. It plans to distribute a cash dividend of 0.3 yuan (tax included) per share, totaling 0.115 billion yuan (tax included), accounting for 93.44% of 24H1's net profit to mother.
Investment advice: We expect the company to achieve revenue of 2.013/2.105/2.253 billion yuan, net profit to mother 0.322/0.352/0.399 billion yuan, EPS 0.80/0.88/1.00 yuan/share, and maintain a “buy” rating in 2024-2026.
Risk warning: Risk of market demand falling short of expectations; risk of increased industry competition.