Incidents:
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 14.6 billion yuan, YoY +7%; net profit to mother of 1 billion yuan, YoY +2%; net profit after deducting non-return to mother of 1 billion yuan, YOY -1%. Among them, 23Q4 achieved revenue of 3.9 billion yuan, YoY +31%; net profit to mother of 200 million yuan, YoY +105%; net profit after deducting non-return to mother of 200 million yuan, YOY +181%. 24Q1 achieved revenue of 3.5 billion yuan, YoY +23%; net profit to mother of 200 million yuan, YoY +25%; net profit after deducting non-return to mother of 200 million yuan, YOY +132%. In 2023, the company plans to distribute a cash dividend of $4.00 (tax included) to all shareholders for every 10 shares.
Comment:
Domestic sales margins have stabilized, and the export boom continues. Looking at the subregion, the company's domestic/export revenue in 2023 was 38/10.8 billion yuan, YoY -3%/+11%. Domestic sales were under slight pressure mainly due to weakening industry demand and a sharp increase in export sales of 23H2. Europe and the US are actively replenishing stocks. In 24Q1, the company's domestic/export sales revenue was 9/26 billion yuan, up about 7%/30% year on year. Steady domestic sales growth improved significantly from month to month, and overseas growth accelerated and inventory replenishment continued to be high. By business, the company's ODM+OEM/independent brand revenue in 2023 was 11.9/2.7 billion yuan (+10%/-6% year over year), accounting for 82%/18% of total revenue. In terms of its own brand, the revenue/net profit of the subsidiary Morphy Technology in '23 was 1.05 billion yuan (-29%/-21%), respectively, with a net profit margin of 14.8% (+1.6 pct year on year).
The profit center is stable, and the 24Q1 profit side benefited from exchange gains and losses. In 2023, the company's gross margin was 22.7% (+1.6pcts year on year), and 24Q1 gross margin was 21.9% (same year on year). The improvement in gross margin in 2023 was mainly due to falling raw material costs, and the company continued to implement cost reduction and efficiency measures, and product profitability was gradually restored. In terms of the period expense ratio, the 2023/24Q1 company's overall expense ratio was +2.2/-3.4 pcts, of which the company's sales/management/R&D/finance expenses rate in 2023 was 4.0%/5.9%/3.8%/0.6%, compared to +0.5/+0.3/+1.3 pcts. The increase in sales rates was mainly due to increased advertising. The year-on-year increase in financial rates was mainly due to a decrease in exchange earnings. The 24Q1 company's sales/management/R&D/finance expenses ratio was +4.0%/+5.5%/+3.8% /- 0.9%, -0.3/-0.3/-2.0pcts year over year. The large fluctuation in the financial expense ratio was due to the increase in exchange earnings.
Net interest rates due to mother in 2023/2024Q1 were 6.7%/5.0% (-0.4/-0.1pct year on year), respectively, and the profit center remained stable. On the balance sheet side, 2023/24Q1, the company's accounts receivable and notes receivable increased 32%/17% year over year, while accounts payable and notes payable increased 31%/26% year over year. In terms of cash flow, the company's net operating cash in 2023/24Q1 was +1.90/200 million yuan, an increase of 34% year-on-year in 2023.
Profit forecasting, valuation and rating: The company is the leading ODM leader for small home appliances, creating a brand matrix to meet the individual needs of consumers. Considering the continuation of the export sales boom, the 2024-25 net profit forecast for Xinbao Co., Ltd. was raised to 11.4/1.28 billion yuan (up 3%/5% from the previous forecast), and the 2026 net profit profit forecast was added to 1.45 billion yuan. The current stock price corresponds to PE 12, 11, and 9 times, maintaining the “buy” rating.
Risk warning: Prices of raw materials have increased markedly, market competition has intensified, and there is a risk of exchange rate fluctuations.