Incident: The company released its 2024 quarterly report. The company achieved total operating revenue of 325 million yuan, an increase of 20.37% year on year; net profit to mother of 95 million yuan, up 22.42% year on year; after deducting non-net profit of 94 million yuan, up 26.68% year on year.
Comment:
24Q1 gross margin decreased, but net margin increased. 24Q1 gross margin/net margin was 36.46%/29.11%, year-on-year -1.47pct/+0.48pct, and -0.98pct/+1.11pct month-on-month. Sales/management/ R&D/finance expenses were 1.48%/1.41%/3.17%/-4.03%, respectively, with year-on-year changes of 0/-0.36/ -0.32/-2.32pct. Revenue increased and period expenses were controlled, leading to a stabilization or reduction in sales/management/R&D expenses, while increased interest income from time deposits increased profit margins.
For the full year of 2023, the company achieved revenue of 1,316 million yuan, -11.32% year-on-year; realized net profit of 384 million yuan, -9.06% year-on-year. The gross profit margin for the year was 37.91%, +2.1pct year on year; the net profit margin was 29.17%, +0.73pct year on year. The annual sales/management/ R&D/ finance expenses ratio was 1.61%/1.68%/3.49%/-3%, with year-on-year changes of +0.52/-0.16/+0.11/-0.22pct, respectively, and remained low.
Revenue by product in 2023:1) Plastic bathroom pump revenue was 556 million yuan, -29.47%, gross profit margin 38.07%, year-on-year +4.32pct; 2) stainless steel pump revenue was 507 million yuan, +10.47%, gross profit margin 38,.24%, year-on-year +1.85pct. 3) GM pump revenue was 220 million yuan, +24.83% year over year, gross profit margin 30.33%, up 1.50 pct year on year. Revenue by region in 2023:1) Domestic sales revenue of 650 million yuan, accounting for 49.6%, revenue +8.29% year on year, gross profit margin 35.36%, +0.05pct year on year. 2) Export revenue of 660 million yuan, accounting for 50.4%, revenue -24.7% YoY, gross profit margin 40.42%, +4.27pct YoY.
The increase in gross margin of export sales and plastic bathroom pumps has led to an increase in overall profitability.
Overseas inventory was digested, and company orders picked up. In 2023, the inventory of overseas customers was gradually depleted, leading to a recovery in orders, and the year-on-year decline gradually narrowed. Furthermore, with the recovery of the domestic economy and the gradual recovery of domestic sales orders, stainless steel pumps and general pumps both grew by varying degrees in 2023. We expect a steady recovery of company orders in 2024 as overseas inventories continue to be digested.
Maintain a high dividend strategy and highlight the company's investment value. The company's dividend rate has been above 70% since 2018. According to the company's annual report, the company plans to distribute a cash dividend of 10 yuan for every 10 shares in 2023, for a total cash dividend of 358 million yuan, accounting for 93.22% of the 2023 net profit. The company currently has abundant cash flow, and the dividend policy is expected to be maintained in the future, demonstrating the company's investment value.
Considering that demand recovery in overseas markets fell short of expectations, we lowered the company's profit forecast appropriately. The company's net profit for 24-26 is estimated to be 4.55/5.15/572 million yuan respectively (the value was 526/556 million yuan before 24-25), and the corresponding PE is 18/15/14X, respectively, maintaining the company's “buy” rating!
Risk warning: Overseas demand falls short of expectations; market competition intensifies; new product promotion falls short of expectations; valuation and profit forecasts fall short of expectations.