Key points of investment

The company released 24H1 results

24H1 achieved revenue of 0.713 billion yuan (-0.86% YoY), net profit of 0.144 billion yuan (-4.48% YoY), and deducted non-profit of 0.143 billion yuan (-3.96% YoY). In a single quarter, 24Q2 achieved revenue of 0.42 billion yuan (-4.98% YoY), net profit to mother of 0.088 billion yuan (-13.74% YoY), after deducting 0.087 billion yuan of non-profit (-13.33% YoY).

Industry beta: Smart clothes dryers and smart lock tracks continue to grow. According to statistical research by CSHIA Research and Aowei Cloud Network, the sales volume of smart clothes dryers is expected to exceed 10 million units in 2024. The market size is expected to exceed 20 billion yuan by 2026, with an average increase of more than 20%. In terms of smart door locks, the China Business Industry Research Institute analyses and predicts that the omni-channel retail volume of smart household door locks in China will reach 20.5 million sets in 2024. Among them, in the first quarter of 2024, the retail sales volume of China's home smart door lock online market was 1.496 million sets, up 24.5% year on year; retail sales volume was 1.51 billion yuan, up 24.8% year on year.

Channel side: Online and offline collaborative development, e-commerce continues to maintain frontline: 24H1 Southern District+North District's total revenue is 0.239 billion, of which: North District's revenue is 0.111 billion, and Southern District's revenue is 0.129 billion. “Develop new frontiers” and “act to build a benchmark retail city” to accurately attract investment and accelerate channel sinking.

E-commerce: 24H1 has revenue of 0.449 billion and a gross profit margin of 60.22%. It maintains the steady growth of leading e-commerce platforms, and rapidly lays out new platforms such as Douyin.

Project channel: It has reached cooperation with a number of central real estate companies and home improvement/property companies, and has great potential.

Category side: Continued refinement of smart products is expected to benefit from “trade-in” catalytic 24H1 smart home product revenue of 0.598 billion, gross profit margin of 56.9%, and the launch of new smart home products and technological innovations with independent intellectual property rights, such as low-noise blue whale power systems and long-life steel wire ropes, to consolidate the industry's leading position in technology. 24H1 traditional clothes rack products had revenue of 0.085 billion and gross profit margin of 48.7%.

Recently, Zhejiang Province, Hubei Province, and Qinghai Province have successively issued trade-in subsidy rules. Judging from the subsidy measures:

1) The subsidy for ordinary household products is basically 15-20%, and can be combined with other discounts. A single piece of home can be reimbursed up to a maximum of about 2,000 yuan, and decoration can be made up to about 0.02 million yuan. 2) Subsidies for age-friendly/age-appropriate products can be as high as 50%. 3) Focusing more on the two directions of intelligent home and adapting to aging, such as smart drying racks, smart toilets, and sitting devices (bath safety), etc., which are expected to catalyze the company's terminal demand.

Financial indicators

1) Gross margin & expense side: 24H1 gross margin was 54.42% (YoY +5.20pct); 24Q2 gross margin was 56.15% (YoY +4.74pct). The cost rate for the 24H1 period was 31.95% (+6.05pct), and the 24Q2 period expense ratio was 32.28% (year-on-year +7.44pct) 2) Operating cash flow: 24H1 net operating cash flow was 0.06 billion yuan (-75% year over year), 24Q2 was 0.085 billion yuan (-58.29% year over year)

Profit forecasting and valuation

As a leader in smart drying, Mrs. Good has a clear position. We expect good growth in the future: the penetration rate of the smart drying industry still has a lot of room to improve, and demand for improvements in stock housing continues to be released. At the same time, the cost performance ratio of products is driving down the market; in addition, the company actively lays out new categories such as smart security, and further expands its business line; on the channel side, Mrs. Good is one of the few leading companies in the industry with multi-channel layout such as offline retail, e-commerce, and engineering. In 2024-2026, we expect the company to achieve operating income of 1.791/2.029/2.349 billion yuan, a year-on-year increase of 6.07%/13.32%/15.75%, and net profit of 0.357/0.399/0.472 billion yuan, up 9.02%/11.95%/18.28% year-on-year, corresponding to the current market capitalization PE of 13.47/12.03/10.17X, maintaining a “buy” rating.

Risk warning

Competition in the smart clothes dryer industry intensifies, and the real estate cycle is declining