Introduction to this report:

The company's 2024Q3 performance was in line with expectations. After splitting up the main players, Omagh still maintained a high growth rate and contributed to the main profit. TCL ice washing is expected to increase in scale, and the low gross profit situation is expected to improve.

Key points of investment:

Raise the profit forecast and raise the target price. The company's 2024Q3 performance slightly exceeded expectations and raised the company's 2024-2026 profit forecast: the company is expected to return 1.002/1.121/1.234 billion yuan in 2024-2026 (previously 0.914/1.007/1.099 billion yuan), +27%/+12%/+10% year-on-year. Referring to the average valuation of comparable companies for home appliances, the company was given 15X PE in 2024, the target price was raised to 13.8 yuan, and the “gain” rating was maintained.

2024Q3 performance slightly exceeded expectations. The company achieved operating income of 13.945 billion yuan in the first three quarters of 2024, +22.95% year on year, net profit of 0.825 billion yuan, or +29.56% year on year; of these, 2024 Q3 achieved operating income of 4.984 billion yuan, +19.86% year on year, and net profit to mother 0.266 billion yuan, or +23.49% year on year.

The Omagh subsidiary's revenue grew relatively fast. 2024Q3 benefits from strong overseas demand, and the company maintained a high level of growth based on a growth rate of +40% or more over the same period. Looking at the two major entities of Omar and TCL Hefei ice washing, we expect Omar +20-25% and TCL Hefei ice washing +10-15%.

Profit: Omar's gross margin is steady, and TCL Hefei ice washing has not improved. Minority shareholders' profit and loss of 2024Q3 was 0.242 billion yuan. Based on the 49% equity ratio of minority shareholders, the subsidiary Guangdong Omar Refrigerator made a profit of 0.494 billion yuan in a single quarter, +14% year over year, with a net interest rate of 13.8%, contributing 0.252 billion yuan. Considering the positive returns from investment, other, and fair value changes this quarter, we estimate that the net profit of TCL Hefei Ice Washing did not exceed 0.014 billion yuan, a year-on-year decrease. 2024Q3 gross margin was 24.04%, +1.93pct YoY. The company's gross margin level improved significantly year-on-year. It is expected that Omar's share of revenue from high-end air cooling products will further increase, leading to an improvement in average shipping prices. In addition, sea freight rates began to fall in 2024Q3. It is expected that the new round of customer negotiations will weaken due to this, and prices will be relatively stable. The gross margin of Omagh's main body is expected to remain at a high level of 25-30%. Since TCL ice washing is in the investment period for new production capacity in 2024, the gross margin is still around 10%, and the subsequent increase in capacity utilization will improve.

Risk warning: risk of large fluctuations in raw material prices, falling overseas demand, risk of exchange rate fluctuations