Incident Overview

The company released its 2023 annual report:

Year 23: Total operating income of 1,227 billion yuan (YOY -3.80%), net profit attributable to mother of 179 million yuan (YOY -14.64%), net profit after deduction of 165 million yuan (YOY -6.00%).

23Q4: Total operating income of 283 million yuan (YOY -9.56%), net profit to mother of 0.4 billion yuan (YOY -91.87%), net profit after deduction of 10 million yuan (YOY -65.22%).

Profit distribution plan: It is proposed to distribute a cash dividend of RMB 10.00 (tax included) to all shareholders for every 10 shares, corresponding to a dividend payment rate of 58.93%. At the same time, the capital reserve fund was used to transfer 3 shares for every 10 shares to all shareholders.

Analytical judgment

Revenue side: After the real estate cycle, the integrated stove industry declined under pressure. According to the “2023 Basic Situation of the National Real Estate Market” issued by the National Bureau of Statistics, in 2023, commercial housing sales area decreased by 8.2% year-on-year. At the end of 2023, residential land for sale increased 22.2% year over year. According to summary data from AVC (AVC), retail sales of integrated stoves in '23 were 24.9 billion yuan, down 4.0% year on year; retail sales volume was 2.78 million units, down 4.2% year on year.

With equal emphasis on multiple channels, e-commerce revenue is impressive. In '23, the company achieved a total turnover of 903 million yuan through e-commerce platforms (mainly Tmall and JD), an increase of 11% over the previous year. According to the sales model, direct sales were 246 million yuan in '23, an increase of 28% over the previous year, and the share of revenue increased to 20%.

Profit side: In '23, the company achieved gross sales margin of 48.66% (YOY+2.04pct), net profit margin of 14.59% (YOY-1.85pct); corresponding Q4 gross sales margin of 45.35% (YOY+0.11pct), net profit margin 1.40% (YOY-14.16pct). We judge that the increase in gross margin in '23 benefited from falling costs and an increase in the share of direct channel revenue with higher gross margin levels in the channel structure. Due to increased depreciation expenses after share payments and capital raising projects, which increased management expenses, sales and R&D expenses also increased throughout the year, and net interest rates to the mother declined year-on-year.

The company's sales/management/R&D expenses in '23 were 23.51%/6.15%/5.21%, respectively, +1.16pct/+2.43pct/+0.50pct, respectively; the corresponding Q4 was 29.40%/9.99%/6.50%, respectively, and +0.79pct/+8.04pct/+2.74pct, respectively.

Investment advice

The company's revenue forecast for 24-26 is $1,40/12.80/1,323 billion, compared with +1.00%/+3.30%/+3.30% year-on-year. In terms of gross margin, it is estimated to be 48.66%/48.66%/48.66% for 24-26, respectively. The corresponding net profit for 24-26 was 2.05/2.15/225 million yuan, respectively, +14.32%/+5.21%/+4.44% year-on-year, respectively. The corresponding EPS was 1.92/2.02/2.11 yuan respectively. Based on the closing price of 28.05 yuan on April 26, 24, the corresponding PE was 14.63/13.91/13.31 times, respectively. Comparable to the company's 24-year average PE, 15 times, coverage for the first time, gave it an “increase in weight” rating.

Risk warning

The recovery in domestic consumption fell short of expectations; the expansion of new products fell short of expectations; and raw material prices rose sharply.