Description of the event

The company disclosed its three-quarter report: In the first three quarters of 2024, the company achieved operating income of 7.396 billion yuan, a year-on-year decrease of 6.78%, realized a net profit of 1.202 billion yuan, a year-on-year decrease of 12.44%, and realized net profit deducted from non-mother of 1.075 billion yuan, a year-on-year decrease of 16.27%.

In the third quarter of 2024, the company achieved operating income of 2.666 billion yuan, a year-on-year decrease of 11.07%, a year-on-year net profit of 0.443 billion yuan, a year-on-year decrease of 18.49%, and realized net profit deducted from non-mother of 0.417 billion yuan, a year-on-year decrease of 22.34%.

Incident comments

Demand in the industry is sluggish, and the profit phase is under pressure. The company's revenue for the first three quarters fell 6.78% year on year. Among them, Q1/Q3/Q3 were +2.75%/-9.63%/-11.07%, respectively. The growth rate declined month-on-month in the third quarter, or due to the fact that real estate sentiment was still sluggish and housing contracts were coming to an end, curtailing new demand in the kitchen appliance industry. According to data from the National Bureau of Statistics, the area of new housing construction in China decreased by 22.2% year on year from January to September 2024, and the sales area of commercial housing decreased by 17.1% year on year. The company's gross margin for the first three quarters of 2024 was 50.43%, down 1.60pct year-on-year, or due to a decline in sales scale. In terms of cost ratio, sales expenses decreased by 0.70 pct year on year, R&D expenses increased by 0.22 pct year on year, or mainly because the company continued to develop and launch new products in the first three quarters. Combined, the company's operating profit for the first three quarters of 2024 (gross profit - taxes and additional - sales & management & R&D expenses plus credit & asset impairment losses) was 1.163 billion yuan, down 19.31% year on year. On this basis, the company's financial expenses ratio was optimized by 0.51 pct year on year, and ultimately the company's net profit margin to mother fell 1.05 pct to 16.25% year on year in the first three quarters of 2024. It is worth noting that cash flow from operating activities fell 62.30% year on year, mainly due to reduced corporate repayments and increased payments to suppliers. The gross margin of the 2024Q3 company was 53.18%, up 0.99 pct year on year, or channel structure change; in terms of cost ratio, the company's sales expense rate/management expense rate/R&D cost rate/financial expense ratio were +2.26/+0.68/+0.12/-0.30pct, respectively. Among them, the sales expense ratio increased sharply or mainly due to the increase in e-commerce channel share during the promotion period. Ultimately, the company's net profit margin for 2024Q3 decreased by 1.51 pct to 16.61% year on year.

The company actively explores technological innovation to drive culinary transformation, and actively explores new category opportunities to save strength for the company's future growth. The company insists on leading industry innovation in the technology sector, focusing on the three dimensions of product innovation, digital leadership and management, and promoting the implementation of full-chain cooking solutions: continuous development and launch of new products, focusing on developing and marketing salt-based products and multiple core products; achieving breakthroughs in AI cooking models, digital kitchen appliance ecosystem construction, voice and NLP, and IoT platforms; improving the company's internal generalization and improving the company's management professionalization level. As of June 30, 2024, the company has authorized a total of 5064 patents, including 261 invention patents; it has participated in a total of 155 standard formulation, of which 42 are leading the formulation of 42, including 2 international standard proposals and 4 national standards.

Investment suggestion: As a leading brand of kitchen appliances, the company is leading the market share in the smoke stove category, and actively explores new product directions around changes in kitchen scenarios and user needs. On this basis, it is expected to further open up incremental markets. The company's net profit for 2024-2026 is expected to be 16.81, 17.96, and 1.924 billion yuan, respectively. The corresponding PE is 13.7, 12.8 and 11.9 times, maintaining a “buy” rating.

Risk warning

1. Risk of fluctuations in real estate sales;

2. The potential risk of an intensification of the competitive landscape.