Core views

Since 2024, industry sentiment has recovered, and the company's operations have resumed steady growth. In January-September, the company's revenue increased 21% year on year; cost reduction and efficiency increased, the comprehensive gross profit margin in January-September was 23.71%, up 1.61 pcts year on year, and net profit from January to September increased 47% year on year. The company continues to deepen its global layout, and the proportion of the company's overseas base revenue in total revenue increased to 21% from January to September 2024. Against the backdrop of a recovery in industry prosperity and a friendly supply and demand environment, the company is expected to continue to increase its share and profitability. The US is expected to enter a cycle of interest rate cuts, and a series of domestic policies are expected to boost real estate sales, which in turn is expected to further boost demand for intelligent controllers. The new energy sector continues to improve product categories, and the market space is broad. At the same time, the company actively lays out new fields such as AI and robotics, which is expected to drive new growth in the future.

occurrences

The company released its three-quarter report for 2024. From January to September 2024, the company achieved operating income of 7.7 billion yuan, an increase of 21.04% year on year; net profit to mother was 0.552 billion yuan, an increase of 46.71% year on year.

Brief review

1. Industry sentiment has recovered, and the company's performance in the third quarter continued to grow well.

Since 2024, downstream inventories have bottomed out and industry prosperity has recovered. The company has adhered to a high-quality development strategy, increased investment in new businesses and technologies, and at the same time accelerated market entry and increased market share. Performance continued to grow well.

From January to September 2024, the company achieved operating income of 7.7 billion yuan, an increase of 21.04% year on year; realized net profit of 0.552 billion yuan, an increase of 46.71% year on year; realized deducted non-net profit of 0.539 billion yuan, an increase of 42.12% year on year.

Looking at business segments, the company's four major sectors of tools, home appliances, new energy, and industry all achieved year-on-year revenue growth. Among them, the basic tools and home appliances industry continued to prosper, and the companies all achieved a steady rise in leading customer share and rapid revenue growth; companies in the new energy sector continued to improve their product categories and are expected to become the company's third growth curve in the future, contributing to growth and flexibility; and the industrial sector accelerated business integration after the acquisition.

In the third quarter of 2024, the company achieved operating income of 2.684 billion yuan, a year-on-year increase of 27.49%; realized net profit to mother of 0.163 billion yuan, an increase of 38.05%; and realized deducted non-net profit of 0.166 billion yuan, an increase of 32.53% year-on-year. Affected by the appreciation of RMB against the US dollar at the end of the third quarter, some exchange gains and losses were generated. Excluding this effect, the company's non-net profit deducted in a single quarter of 2024 increased sharply year-on-year, and profit was stable from month to month.

2. Operate healthily, maintain investment, and enhance profitability.

From January to September 2024, the company's comprehensive gross profit margin was 23.71%, up 1.61 pcts year on year; the total cost of the three items was 1.129 billion yuan, up 12.79% year on year, mainly driven by investment in new business, new products, and investment in overseas bases. The three expenses ratio was 14.67%, down 1.07 pcts year on year; net return to mother rate of 7.17% increased 1.26 pcts year on year; net cash flow from operating activities was 0.752 billion yuan, clearly exceeding net profit, overall health and health Continued.

In the third quarter of 2024, the company's comprehensive gross profit margin was 23.36%, up 0.21pcts year on year; the total cost of the three items was 0.369 billion yuan, up 8.82% year on year; the three expenses ratio was 13.77%, down 2.36 pcts year on year; and the net profit margin to mother was 6.09%, up 0.47 pcts year on year.

3. Accelerate market expansion, and overseas bases account for more than 20% of the output value.

With the advantages of platform-based enterprises and international operations, the company continues to consolidate its leading edge and accelerate its market expansion. The production capacity of the company's mature overseas base (Vietnam and India) increased rapidly, and the output value from January to September 2024 reached the level of the full year of 2023. The new base (Mexico+Romania) was put into operation to achieve mass production, and has now entered the phase of capacity climbing and operation optimization. From January to September 2024, the share of the output value of the company's overseas bases increased from about 16% last year to about 21%.

4. Investment advice.

Downstream inventories have bottomed out since 2024, and industry sentiment has recovered. If the US enters a cycle of interest rate cuts, it is expected to further catalyze demand. With the continuous enrichment of the company's product matrix, the strengthening of the competitiveness of superior products, and the continuous deepening of the company's overseas global layout, the company continues to have a lot of room to increase its market share in the fields of home appliances, tools, and new energy sources. At the same time, the company actively lays out new fields such as AI and robotics, which is expected to drive new growth in the future. Through continuous product innovation, cost reduction and efficiency, etc., the company's profitability is expected to increase further in the future. We expect the company's revenue for 2024-2026 to be 10.86 billion yuan, 12.86 billion yuan, 15.23 billion yuan, and net profit to mother of 0.71 billion yuan, 0.92 billion yuan, and 1.15 billion yuan respectively. The corresponding PE is 21x, 16x, and 13x, respectively, maintaining a “buy” rating.

5. Risk warning: Changes in the macroeconomic environment affect consumer demand in the terminal market, the home appliance and power tool business falls short of expectations; market competition intensifies, affecting the company's supply share of major customers, or leading to a decline in the company's gross margin; declining competitiveness of major customers, affecting the company's related business growth; trade policy changes affecting the company's raw material supply and product delivery; chip shortage and price increases exceeding expectations, affecting the company's gross profit margin; sharp exchange rate fluctuations affect the company's gross margin and exchange profit and loss; the revenue growth rate of the new energy business falls short of expectations; the gross margin of the new energy business falls short of expectations; the gross margin of the new energy business falls short of expectations; the company's production efficiency Upgrades, supply chain optimization, and cost control fall short of expectations, etc.