Introduction to this report:
Some adjustments in the company's distribution management strategy and team put pressure on the company's Q3 performance. After that, with the end of the adjustments, the company's operations are expected to return to the right track, and performance is expected to pick up.
Key points of investment:
Some adjustments in the company's distribution management strategy and team put pressure on the company's Q3 performance. After that, with the end of the adjustments, the company's operations are expected to return to the right track, and performance is expected to pick up. Considering that the company's Q3 performance was lower than expected, there is some uncertainty about the timing of subsequent channel adjustments, and industry competition is relatively fierce. We lowered our profit forecast. We expect the company's 2023-2025 EPS to be 1.08/1.23/1.39 yuan (original value 1.44/1.71/2.01 yuan, amplitude modulation -25%/-28%/- 31%), compared with -7%/+14%/+13%. Referring to comparable companies in the same industry, we gave the company 16x PE in 2024, lowered the target price to 20 yuan, and maintained the “increase in holdings” rating.
The company's performance fell short of expectations. 2023Q3 achieved operating income of 169 million yuan (-32%) and net profit of 225 million yuan (-47%). Q3 gross margin was 47% (+1pct), net profit margin was 15% (-4pct), and sales, management, R&D, and financial expenses were +4, +4, +4, and -2pct, respectively.
It is expected that industry demand is relatively sluggish+the company's dealer management strategy and personnel adjustments are the main reasons why the company's Q3 performance is under pressure. As sales in the real estate market and demand in the integrated stove market are still recovering slowly and weakly, and the unit price of integrated stoves is high, the overall sales volume of the industry is under pressure.
According to Aowei Cloud Network, the retail sales volume of the 2023Q3 integrated stove market was -7.6% year-on-year. At the company level, the expansion of the dealer team is one of the company's important driving points. It is expected that in Q3, under the premise of changes in management personnel, the number of investment offers falls short of expectations, which is an important reason for the change in performance.
Looking ahead, with the completion of team personnel and strategy adjustments, the company is expected to return to a normal development path, and the performance growth rate is expected to pick up.
Risk warning: Increased competition in the industry puts pressure on performance, and fluctuations in raw material prices put pressure on performance.