Incident Overview

The company released its 2024 three-quarter report.

Strong increase in 24Q3.

The company achieved revenue of 0.57 billion yuan in 24Q3, an increase of 57.4% over the previous year; net profit to mother was 0.087 billion yuan, an increase of 49% over the previous year. The company's main business is cleaning tools (wet and dry vacuum cleaners, small air compressors). The main business has been consolidated in recent years, and new horizontal products such as nail guns and OPE have gradually opened up room for growth in 24 years. 24H1's revenue increased 57% year on year, and 24Q3 continued to increase its revenue. It is expected that with the investment of production capacity in Malaysia, the company will reach a period of rapid growth.

The main business has high ceilings, and high-quality products are deeply tied to major downstream customers.

After resuming Ousheng's growth, the company's revenue doubled in 2019-2022. Revenue did not substantially collapse after major downstream customers left the warehouse in the past two years, and continued to grow rapidly in 2024. The company's high-quality products are deeply tied to downstream supermarkets such as Lowe's, Home Depot, etc., and the deepening cooperation between the company and customers such as Stanley Baite has matured in ODM and licensing models. The recovery in downstream demand comes from improvements in North American real estate after interest rate cuts. The transmission order of recovery is: hand tools - electric tools - OPE. Inventory characteristics plus product characteristics all have similar characteristics. I am optimistic that downstream demand in the company's industry will benefit from interest rate cuts in the US market in the medium term.

The company has good cash flow and a very high percentage of dividends, which shows value.

According to the company's financial report, the company has established stable cooperative relationships with dozens of internationally renowned retailers such as Walmart, Lowe's, The Home Depot, and Costco. In recent years, the revenue share of the company's top five downstream customers has basically stabilized at 60%-70%. Stable cooperation with major customers helps the company gradually increase its revenue center. More than 90% of the company's revenue comes from exports, major downstream customers gather, the cash flow situation is good all year round, the net present is relatively high, and the 24H1 net present ratio exceeds 2.0. While maintaining a gross margin of more than 35%, the company has guaranteed a high dividend ratio. In the past few years, dividends have all accounted for close to 80% of profits, and 24H1 is also accompanied by mid-term dividends. The company has advantages such as high growth, good cash flow, high dividends, etc., and its value attributes are outstanding.

Investment advice

The company has technical advantages and strong market expansion capabilities in the field of small air compressors and wet and dry vacuum cleaners, and has the ability to expand categories horizontally. The company's potential product care robots are also expected to accelerate growth. We maintain our profit forecast. We expect the company's revenue for 2024-2026 to be 1.83 billion, 2.56 billion yuan, and 3.43 billion yuan, respectively, with year-on-year growth rates of +50.3%, +40.2% and +33.9% respectively; net profit to mother for 2024-2026 is 0.255 billion, 0.374 billion, and 518 million yuan, respectively, with year-on-year growth rates of +45.7%, +46.8%, and +38.6%, respectively. The corresponding EPS was 1.39 yuan, 2.05 yuan, and 2.84 yuan, respectively, and the closing stock price of 25.2 yuan on November 1, 2024 was equivalent to PE 18.1, 12.3, and 8.9 times, maintaining a “buy” rating.

Risk warning

Terminal market demand recovery falls short of expectations, risk of exchange rate and freight rate fluctuations, geopolitical risks, etc.