Incident: 2024Q1 achieved operating income of 5.378 billion yuan, +8.38% year over year, and net profit to mother of 470 million yuan, +7.23% year over year.

On the revenue side, according to Aowei data, the 24Q1 company's core newly-needed electric kettle/rice cooker online sales were +4.4%/+1.9% year-on-year, respectively, and the growth rate of the core category was relatively good.

2024Q1's gross margin was 24.42%, -0.8 pct year on year, and the net margin was 8.73%, -0.08 pct year on year.

We expect profit margins to decline year-on-year due to changes in the revenue structure brought about by the relatively low gross margin and the rapid growth rate of export sales. The quarterly sales, management, R&D, and financial expense ratios of 2024Q1 were 10.94%, 1.71%, 1.75%, and -0.57%, respectively, -0.13, -0.2, +0.08, and -0.17pct year-on-year.

On the balance sheet side, the company's 2024Q1 monetary capital+transactional financial assets were 4.871 billion yuan, 6.6% year over year, inventory was 1,982 billion yuan, -5.59% year over year. The total number of notes receivable and accounts receivable was 2.309 billion yuan, +27.74% year over year. On the turnover side, the company's 2024Q1 inventory, accounts receivable and accounts payable turnover days were 46.99, 43.12, and 69.8 days, respectively, compared to -8.71, +9.53, and +5.34 days year-on-year. On the cash flow side, the net cash flow from 2024Q1's operating activities was $1,043 billion, +38.51% year over year, with cash inflow of 5.262 billion yuan from sales of goods and provision of labor services, or +22.86% year over year.

Investment advice: In terms of domestic sales, sales through emerging online channels continue to gain strength to drive domestic sales growth. In terms of export sales, the company has announced the amount of related transactions with SEB. The net profit for 24-26 is estimated to be 24.0/26.0/28.01 billion, respectively, and the corresponding dynamic PE is 20x/18.4x/17x, respectively, maintaining the “buy” rating.

Risk warning: raw material price fluctuation risk; market competition risk; replacement product risk; exchange rate risk; new product sales and launch falling short of expectations, etc.