Incident: Changhong Meiling announced its 2024 quarterly report. The company achieved revenue of 5.94 billion yuan in Q1, YoY +18.2%; realized net profit attributable to mother of 160 million yuan, YoY +26.9%; realized net profit without deduction of 190 million yuan, YoY +79.6%. We believe that the revenue growth rate of Changhong Miling air conditioning rebounded in Q1, the refrigerator and freezer business grew steadily, and the operating performance in a single quarter was impressive.
Q1 revenue growth rate increased month-on-month: Q1 Changhong Meiling's revenue YoY +18.2%, and the growth rate increased 13.2 pcts month-on-month. By product: 1) Domestic and foreign sales of Q1 air conditioners are booming. The company continues to improve channels and product layout in the domestic market, and accelerates the expansion of new markets and new customers in overseas markets. We infer that the domestic and foreign sales revenue of Q1's air conditioning business grew rapidly year-on-year. According to industry online data, Q1 Changhong Air Conditioner's domestic/ export sales volume YoY +33.7%/+19.3% (2023Q4 is -18.0%/+65.5%). 2) The company promotes the upgrading of refrigerator products in overseas markets and benefits from the advantages of the domestic supply chain. We speculate that Q1 has maintained a high trend in export sales of refrigerators, and domestic sales are stable due to the influence of the industry climate. According to industry online data, domestic/export sales YoY of Meiling refrigerators -3.2%/+40.6% in January-January. Looking ahead, the company will continue to improve domestic channels and accelerate the expansion of overseas markets, and revenue is expected to continue to rise.
Q1 gross margin declined year-on-year: Q1 Changhong Meiling's gross profit margin was 13.4%, -1.3 pct year on year. We infer that it is mainly due to increased competitive pressure on domestic air conditioning prices, and strategic price reductions in export prices to enhance overseas competitiveness. According to Aowei Cloud Network data, the average price of Q1 Changhong air conditioning online/offline YoY is -4.9%/-6.0%. According to data from the General Administration of Customs, the average export price of domestic air conditioning/refrigerators/washing machines in Q1 YoY was -5.0%/-1.1%/-3.9%.
Q1 profitability increased slightly year-on-year: Q1 Changhong Meiling's net interest rate was 2.6%, +0.2pct year-on-year. The company's profitability has improved mainly because: 1) The company adheres to a value-oriented and comprehensive management approach, and continuously improves capital efficiency, channel efficiency, product efficiency, and management efficiency. The cost ratio for the Q1 period was -1.5pct year-on-year, with sales, management, and R&D expenses ratios -0.9pct, -0.4pct, and -0.3pct year-on-year. 2) The company is preparing to return bad debts in the current period, and Q1 credit impairment loss/revenue was +0.3 pct year-on-year. In the future, as the company continues to be value-oriented and gradually improves operating efficiency, the company's profitability is expected to improve steadily.
Marginal improvement in Q1 operating cash flow: Changhong Meiling's Q1 net operating cash flow of -110 million yuan compared to -370 million yuan in the same period last year. The company's net operating cash outflow decreased, with a marginal year-on-year improvement, mainly due to the recovery in revenue scale, and the YoY of cash received from sales of goods and services in Q1 +23.1%. Q1 The company's contract debt balance was 470 million yuan, YoY +14.4%, indicating that downstream customer expectations are positive. The monetary fund balance at the end of the period was 7.92 billion yuan, YoY +35.3%, and cash reserves were abundant.
Investment advice: Changhong Meiling's product layout is diverse, and domestic and foreign sales are developing collaboratively. The company continues to implement the “one goal, three main lines” business policy, and the revenue scale and profitability are expected to continue to increase. The company's EPS for 2024 to 2026 is expected to be 0.88/1.01/1.18 yuan, respectively, covering the investment rating given to Buy-A for the first time, giving the company a dynamic price-earnings ratio of 15 times in 2024, which is equivalent to a six-month target price of 13.21 yuan.
Risk warning: Competition in the industry has intensified, raw material prices have risen sharply, foreign trade intrusion risks, and related assumptions and predictions fall short of expectations.