Event: On October 29, 2024, TCL Smart Home released its 2024 three-quarter report. Revenue/net profit after deduction for the first three quarters of 24 years was 13.9/0.83/0.81 billion yuan, respectively, +23.0/+29.6/ +39.2% year over year; of these, 24Q3 was 4.98/0.27/0.25 billion yuan, respectively, +19.9/+23.5/ +33.0% year over year, respectively. Revenue and profit performance all exceeded market expectations.

24Q3 export sales performance was superior to domestic sales. Domestic sales of TCL refrigerators and domestic sales of washing machines increased rapidly. According to industry online data, 24Q3 Omar refrigerator sales were +10.4%, with domestic/export sales of -0.5/ +11.3%, and TCL refrigerator sales +8.1% year-on-year. Among them, internal/export sales were -5.6/ +59.0%, and TCL washing machine sales were +39.7% year-on-year, with internal/export sales of +33.5/ +48.8%, respectively. We expect export sales to continue to outperform domestic sales in 24Q3, with Omar refrigerators and Hefei home appliances growing rapidly.

Profitability increased in 24Q3, and the expense ratio increased during the period.

1) Gross profit margin: The first three quarters of 24 quarters/24Q3 were 23.4/24.0%, respectively, and +0.6/+1.9pct year-on-year respectively. The increase in gross margin in 24Q3 was mainly due to product structure upgrades and regional revenue structure changes.

2) Expense ratio: Sales/management/R&D/finance expense rates for the first three quarters of 24 were 3.6/3.6/3.5/ -0.4%, respectively, +0.1/+0.3/+0.2/+0.5pct, respectively. 24Q3 was 3.7/3.7/4.2/ 1.1%, and the year-on-year ratio was +0.3/+0.7/+0.4/+0.8pct, respectively. The increase in the estimated sales expense ratio is mainly due to TCL's own brands increasing domestic and foreign marketing investment, and the increase in financial expenses is expected to increase mainly due to TCL's own brands increasing domestic and foreign marketing investment. It is an effect of exchange rate fluctuations.

3) Net interest rate to mother: 5.9/ 5.3% for the first three quarters of 24 quarters/24Q3, respectively, and +0.3/+0.2pct year-on-year, respectively.

Investment suggestions: The company's Hefei home appliances focus on TCL's own brand of high-end ice washing business and actively promote a global layout. Overseas ice washing shipments all increased rapidly in 24Q3; Omar refrigerator export sales remained leading, product structure continued to be optimized, and continued to expand emerging markets; at the same time, focus on cost reduction and cost control to improve operating efficiency, and are optimistic that revenue and profit will continue to grow. We expect net profit for 2024-2026 to be 0.998/1.136/1.289 billion yuan, the corresponding EPS is 0.92/1.05/1.19 yuan, respectively, and the current stock price corresponding PE is 12.8/11.3/9.9 times, respectively. Maintain a “Recommended” rating.

Risk warning: raw material price fluctuations, exchange rate fluctuations, increased market competition, changes in trade policies in exporting countries and regions, unrecoverable accounts receivable, etc.