Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 15.5 billion yuan, 1.2% year on year; realized net profit of 61 million yuan, -64% year on year; realized deducted non-net profit of 480 million yuan, -70.3% year on year. Looking at a single quarter, Q4 achieved revenue of 4.97 billion yuan, -4.4% year on year; realized net profit of 0.1 billion yuan, -98.5% year over year; realized net profit of -40 million yuan after deduction, -107.4% year on year.
In 2023, the company's cash dividend was 320 million yuan, and the performance dividend rate reached 52.2%. In 2024, Q1 achieved revenue of 3.47 billion yuan, a year-on-year increase of 7.4%; realized net profit of 300 million yuan, a year-on-year decrease of 8.7%; and realized deducted non-net profit of 290 million yuan, an increase of 0.3% over the previous year.
Adding can support revenue growth, and domestic and overseas offline channels continue to expand. By product, the company achieved revenue of 7.74 billion yuan/7.66 billion yuan/1 billion yuan in 2023, respectively, -1.7%/+4.8%/-28.9%, respectively. The revenue growth was mainly driven by Tianko brand growth; by region, domestic and foreign sales achieved revenue of 8.98 billion yuan/6.52 billion yuan, respectively, -11.4%/+25.8% year-on-year; by sales model; by sales model, online and offline respectively achieved revenue of 9.68 billion yuan/5.82 billion yuan, respectively %/ +5.9%. Looking at domestic and offline channels, Covos sales outlets have surpassed 2,500, and Tianke has built a total of nearly 800 sales stores. Overseas, Joke has already occupied 1,800 Target retail channels in the US.
Increased competition has put pressure on gross margins, and maintenance costs have led to increased cost rates. The company's gross margin decreased by 4.1pp to 47.5% year-on-year in 2023, with gross margins of service robots/smart household appliances/other products being 42.7%/52.8%/13.8%, respectively, -2.2pp/-6.6pp/ -6.8pp, respectively. The decline in gross margin was mainly due to the decline in average price due to increased industry competition and the increase in material costs due to the introduction of new functions; in terms of sales models, online and offline gross margins were 52.2%/39.6%, respectively -4.5pp/-2.8pp; in terms of cost ratio, In 2023, the company's sales/management/finance/R&D expenses rates were 34.2%/3.8%/-0.2%/5.3%, respectively, compared with +4pp/ -0.4pp/+0.6pp/+0.5pp. Among them, the increase in sales expenses was mainly due to increased marketing and promotion expenses and increased after-sales maintenance costs, and the company's net interest rate decreased by 7.2 pp to 3.9% year on year.
24Q1 gross margin continued to be under pressure, and fee control stabilized net interest rates. The company's Q1 gross margin decreased by 3.5pp to 47.2% year-on-year in 2024. In terms of cost ratio, the company's sales/management/finance/R&D expenses rate in 2023 was 27.7%/3.4%/0.5%/6.3%, respectively, -1.6 pp/ -1.3 pp/-0.5 pp/+0.6 pp, respectively. Looking at net interest rates, the company's net interest rate decreased by 1.5pp to 8.6% year-on-year in Q1 in 2024. The year-on-year decline in Q1 gross margin was mainly due to the high base during the 23Q1 period. Starting in 24Q2, it is expected that profitability will rise steadily as the control of sales expenses and the impact of the base figure subsides.
Profit forecasting and investment advice. In 2023, the company's Covos/Tianke online shares were 37.6%/43.4% respectively. They are all leading brands in the two major racing tracks of sweepers and floor washers. The profitability of the two major brands is clearly under pressure due to increased market competition and increased maintenance costs. We believe that as a leading cleaning appliance company, the company has deep barriers in terms of offline channels. As the company continues to push forward channel reforms, it is expected to return to a growth trajectory in 2024. The company's 2024-2026 EPS is estimated to be 2.26 yuan, 2.69 yuan, and 3.31 yuan respectively. Considering the competitive pattern of sweepers and floor washers in the small household appliances industry, and the company's leading position in the segmented circuit, 27 times PE will be given in 2024, corresponding to a target price of 61.02 yuan, maintaining a “buy” rating.
Risk warning: Risks such as export sales growth falling short of expectations, falling short of expectations in new product releases, and increased competition.