The company released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 0.862 billion yuan, a year-on-year increase of 0.03%; net profit to mother 0.123 billion yuan, -4.43% year-on-year; net profit after deduction of 0.113 billion yuan, or -8.63% year-on-year. 2024Q2 achieved operating income of 0.481 billion yuan, -6.71% YoY; net profit to mother of 71.2 million yuan, -12.71% YoY; net profit of 66.99 million yuan after deduction, -13.78% YoY.
Driven by industry factors, there was some pressure on the company's operating performance in the first half of 2024. In the first half of 2024, the real estate market continued its downward trend. According to Optech's 2024 semi-annual report quoting data from the National Bureau of Statistics, the sales area of newly built commercial housing in China fell 19.0% year on year, of which residential sales area fell 21.9% year on year. Consumption of related building decoration and furniture products was relatively sluggish, and total retail sales of construction and decoration materials fell 1.2% year on year. Looking ahead, we believe that with the release of demand for improvements such as gentle restoration and renovation of old housing in the second-hand housing market, demand for related products is expected to gradually recover.
The company increased investment in product development and brand to lay the foundation for long-term growth. 2024H1's net profit margin to mother was 14.29%, -2.13pct year on year, gross profit margin 46.00%, year-on-year -0.53 pct. 2024H1's sales expenses rate reached 19.90%, compared to +2.38pct. Judging from the brand marketing effect, in the first half of 2024, the company was awarded the official partner of the Zhejiang Swimming Team. Opp brand ambassadors Pan Zhanle, Yu Yiting, and Fei Liwei participated in the 2024 Paris Olympics; the “Opp” brand won the “National Household Goods Industry Quality Leading Brand”, “China Home Furnishing Star Brand of the Year”, and “Top 100 New Quality Home Furnishing Brand Value in 2024”. In the first half of 2024, the company's R&D cost rate was 5.74%, up 0.41pct, and achieved breakthroughs in many key technical fields including sterilization, air duct design, enhanced heat transfer, quick cooling of heat and cold, and intelligent control. By the end of June 2024, the company had 839 independent patented technologies (including 32 invention patents, 628 utility models, and 179 design patents). In addition, the 2024H1 company's management expense ratio and financial expense ratio were 6.95% and -1.72%, respectively, +0.53pct and +0.04pct year-on-year, respectively.
Profit forecast and rating: We expect net profit of 0.324, 0.344, and 0.364 billion yuan in 24-26, with a year-on-year increase of 4.7%, 6.2%, and 5.8%. The current closing price corresponds to the 24-25 PE of 11.88 and 11.19 times. As a leading enterprise with a dual layout of home appliances & home furnishings, the company is rated 16 to 17 times PE in 2024, corresponding to a reasonable value range of 12.91 to 13.72 yuan.
Risk warning: The risk of raw material price fluctuations, channel promotion falls short of expectations, and new product development falls short of expectations.