occurrences

Boss Electric Releases 2024 Interim Report

With 2024H1, the company achieved revenue of 4.729 billion yuan, net profit of 0.759 billion, -8.48% YoY, net profit 0.658 billion, -11.91% YoY; with 2024Q2, the company achieved revenue of 2.492 billion, -9.63% YoY, net profit to mother 0.361 billion, -18.15% YoY, net profit 0.305 billion, or -24.76% YoY. In addition, the company pays a cash dividend of 5 yuan (tax included) for every 10 shares, and a cash dividend of 0.472 billion yuan, accounting for 62% of H1's net profit.

Revenue declined year-on-year, and traditional categories were relatively stable

The decline in the completed area of H1 real estate combined with a weak consumption environment, and the company's revenue declined slightly. Among them, revenue from traditional smokes/stoves was relatively stable, -3%/-1% year over year; while the second category group (steamer/oven/all-in-one machine) and the tertiary category group (dishwasher/water purifier/water heater/integrated stove, etc.) were under greater pressure. By brand, the revenue of famous brands positioned for mass consumption was +40% compared to the same period, and the sales growth rate was more impressive; by channel, the engineering channel is expected to be under high growth pressure under the Baogao building base during the same period last year, and the performance of retail and e-commerce channels is relatively stable.

Product structure has been adjusted, and gross margin is falling under pressure

The gross margins of H1&Q2 companies were -3.1 and -2.4 pct, respectively, mainly due to the increase in revenue share of famous brands targeting mass consumption and low gross margins. Furthermore, the average price of traditional brand products is expected to decline. On the cost side, the company strengthened the control of marketing expenses. The Q2 sales expense ratio was -1.2 pct year over year; however, due to the decline in revenue, management/R&D expense ratios were +0.7/+0.6 pct year on year; further factors such as increased interest income, other earnings, and increased credit impairment losses affected the net interest rate by +0.5/+0.8/-0.8 pct, respectively, and the Q2 attributable net interest rate was 1.5 pct year on year.

Maintaining a high percentage of dividends, the policy is expected to catalyze demand

The net operating cash flow of H1 was -57% to 0.414 billion, mainly due to a slowdown in the pace of repayment and an increase in the repayment of bank accounts payable at maturity; it is worth mentioning that the company maintained a high dividend in the medium term, with H1 cash dividends of 0.472 billion yuan, accounting for 62% of H1's net profit. In the future, considering the gradual implementation of the national trade-in policy, demand is expected to be boosted for large kitchen appliances as a key subsidy category; the company has outstanding channel and brand advantages, and operations are expected to benefit from a recovery.

High dividends & policy potential catalysts, maintaining a “buy” rating

Although fundamentals were under pressure in the first half of the year, based on the potential catalyst of the central government's “trade-in” policy, the company's leading position is expected to recover; revenue is expected to be +2%/+8% YoY to 11.4/12.3/13.2 billion in 2024 to 2026; net profit to mother was 0%/+8%/+8% YoY to 1.73/1.86/2.02 billion, respectively, with corresponding valuations of 1,0/9/8X, respectively. Referring to the 62% dividend rate for the first half of the year, the company's potential dividend rate is about 6%, maintaining a “buy” rating.

Risk warning: 1. The downward pressure on demand for new housing affected by real estate exceeded expectations; 2. The competitive pressure on industry prices exceeded expectations.