Description of the event

The company disclosed its 2024 three-quarter report: In the first three quarters of 2024, the company achieved operating income of 12.69 billion yuan, a year-on-year increase of 17.99%, achieved net profit of 0.785 billion yuan, a year-on-year increase of 6.66%, and realized net profit deducted from non-mother of 0.797 billion yuan, a year-on-year decrease of 0.57%; of these, the 2024Q3 company achieved operating income of 4.967 billion yuan, an increase of 12.88% over the previous year, and achieved net profit to mother of 0.343 billion yuan, the same The year-on-year increase was 0.53%, and net profit not returned to mother was 0.306 billion yuan, a year-on-year decrease of 13.71%.

Incident comments

Export revenue continued to grow at a high rate, and the company's profitability declined slightly due to the business structure. The company's revenue increased 17.99% year on year in the first three quarters of 2024. Among them, Q1/Q2/Q3 was +22.79%/+20.51%/+12.88%, respectively. Among them, export sales revenue in the single third quarter increased sharply by about 20.27% year on year on a high base. Overall overseas demand was strong, and domestic sales revenue fell by about 15.28% year on year, or mainly due to domestic demand still recovering, consumer spending was relatively cautious. On this basis, 2024Q3's gross margin decreased by 2.23 pct year on year, or mainly due to an increase in the share of low gross margin overseas revenue, the sales expense ratio decreased by 0.22 percentage points year on year, the management expense ratio decreased by 0.26 percentage points year on year, the operating expenses control effect was good, and the R&D expense ratio decreased by 0.35 percentage points year on year. Combined, the 2024Q3 company's operating profit (revenue - cost - tax and additional - sales & management & R&D expenses + credit & asset impairment loss) was 0.444 billion yuan, a year-on-year decline 1.98%, the corresponding operating margin was 8.93%, down 1.35 percentage points from the previous year; it is worth noting that the year-on-year increase in net profit after deduction of 2024Q3 was mainly due to fair value changes resulting from holding (or disposal) of transactional financial assets and liabilities during the reporting period of 16.829 million yuan (-42.3532 million yuan in the same period last year). Additionally, 2024Q3's net cash flow from operating activities decreased by 8.4% year over year.

Currently, the company is engaged in export sales of small Western-style household appliances, while vigorously developing domestic brand business, and is committed to achieving balanced development of overseas sales and domestic brands. The company's export business is mainly carried out in the OEM/ODM model. The main categories include kitchen appliances, household appliances and other small household appliances. As an industry leader, the company has formed a strong scale advantage and comprehensive product competitive advantage. Domestic market companies implement the “one platform, professional products, professional brand” strategy. The main independent brands operating include global brands Morphy Richards (Morphy), Donlim (Dongling), tea appliance brand Mingzhan, personal care and beauty appliance brand GEVILAN (Gelan), coffee machine brand Barsetto (Barsetto), etc., and adopted a “hot product+content marketing” approach to establish a “product manager+content manager” dual-wheel drive mechanism, and achieved positive results in the company's Morphy Richards (Morphy) brand business On the basis of results, gradually expanding this method to the company's other independent brand businesses is expected to guarantee the continued growth of the company's domestic sales business.

Investment advice: The company is committed to establishing a diversified technical service system for the small household appliance industry, providing customers with a package of solutions including market strategy, design research, product implementation, mold development, certification testing and mass production technology, while vigorously developing the domestic market to better meet consumers' personalized quality of life needs. On this basis, the company has successively adopted cost reduction and efficiency measures such as technological innovation and production efficiency improvement, and the company's overall competitiveness has been gradually improved. We expect the company's net profit to be 10.48, 13.11, and 1,521 billion yuan respectively for 2024-2026, corresponding PE of 11.3, 9.1, and 7.8 times, respectively, to maintain a “buy” rating.

Risk warning

1. Macroeconomic fluctuations bring the risk of reduced revenue delivery; 2. The sharp rise in raw material costs brings the risk of declining profitability.