Q1 Revenue growth rate is impressive, and the profit side is under short-term pressure due to delays in cost transfer
2024Q1's revenue was 2.83 billion yuan/yoy +30.8%. 2024Q1 net profit attributable to mother is 185 million yuan/yoy -26.7%, net profit not attributable to mother is 135 million yuan/yoy -38.8%, non-current profit and loss of 50.41 million yuan, of which 42.97 million yuan was subsidized by the government. Net operating cash flow yoy -159.05% means that in order to expand the scale of business, the company purchased raw materials based on on-hand orders, so the growth rate of cash payments was higher than the rate of receipt of cash. Overseas demand continues to recover, cost pressure is expected to improve quarterly, and profit side recovery can be expected. We maintain our profit forecast. We expect net profit of 14.8/17.1/1.93 billion yuan from 2024-2026, yoy +15.7%/+15%/+13.2%, corresponding EPS of 2.16/2.49/2.82 yuan. The current stock price corresponds to 11.6/10.1/8.9 times PE, maintaining a “buy” rating.
Shipments in all businesses have risen, and demand for interactive tablets has increased in volume to drive revenue growth: 2024Q1 smart interactive display/ innovative display/ smart TV revenue yoy +11.28%/+114.62%/+16.77%, shipment volume yoy +6.49%/+258.32%/+11.81%, with shipments of smart interactive tablets/professional display products yoy +12.97%/+4.53%. 2024Q1 gross profit margin 12.6% /yoy-6.46pct, net profit margin 6.5% /yoy-5.19pct, sales/management/R&D/finance expense ratios were 3.1%/2.7%/4.9%/-1.4%, yoy+0.93pct/-0.36pct/-0.33pct/-1.74pct, respectively. The price of LCD panels, the main raw material, rose and was at an all-time high at the end of the period, and the company's cost bonus pricing strategy was lagging behind. At the same time, the company increased its brand promotion efforts, with sales expenses of 86.04% reaching 88.54 million yuan. The reduction in financial expenses ratio was 19.4781 million yuan in 2024Q1 exchange revenue, while the 2023Q1 exchange loss was 18.8817 million yuan.
The recovery in demand is expected to drive up expectations. Short-term costs can smooth out short-term costs throughout the year and disrupt the revenue of Hisense Video, leading color TV exporter, by 12.7 billion/yoy +10.6% in 2024Q1, and net profit of 4.7 billion yuan/yoy -24.8%. Reviewing Kangguan Technology's profitability in 2021:2021H1 panel prices rose, and the company's gross margin/net profit margin was 11.7%/5.2%, but as the company raised prices and panel prices entered a downward cycle starting in September, the profitability of the 2021H2 company quickly recovered. The annual gross margin/net profit ratio was 15.4%/7.8%, yoy-0.26pct/+1.23pct. Profitability in a single quarter was under pressure, but overall profitability was stable over many quarters throughout the year. As demand for large-scale panel procurement comes to an end, cost pressure is expected to improve quarterly. Short-term performance pressure is not a hindrance to rising stock prices. The recovery in demand reflected by revenue growth is a driving force for improving operations and a steady rise in stock prices.
Risk warning: Prices of raw materials have risen sharply, there is a risk of exchange rate fluctuations, and the expansion of innovative categories falls short of expectations.