Key points of investment:

Conclusion: Considering that the company's downstream demand is still recovering, the company's 2024-2025 EPS forecast was lowered to 0.54/0.68 yuan (originally 0.64/0.67 yuan), and the 2026 EPS forecast was added to 0.86 yuan. Referring to comparable company valuations, the target price was lowered to 10.80 yuan (originally 12.16 yuan) to maintain the “gain” rating.

The growth rate of the engineering channel is impressive, and the increase in cost reduction boosts profits. In 2023, engineering channel revenue increased 61.07% year-on-year, and real estate supply-side policies supported sales of security doors and smart door locks.

The company's gross margin increased significantly in 2023. Among them, the gross margin of steel safety gates/other doors/smart locks was +3.25pct/+2.77pct/ -1.76pct, and the gross margin of e-commerce, engineering/distribution was +7.28pct/+3.24pct/+2.43pct, respectively. The company launched Wangli Robotic Safety Gate to strengthen the intelligent product layout, while strengthening cost control and increasing cost efficiency with remarkable results.

Streamline SKUs, focus on popular models, and drive revenue growth through intelligence. It is expected that the company will continue to streamline product SKUs, actively promote new products while refining products in flagship stores, and expand categories using safety doors to drive products such as wooden doors and smart locks. In 2023, the company achieved revenue of 3,044 billion yuan/ +38.20%, and 2024Q1 achieved revenue of 435 million yuan/ +10.26%. It is expected that product intelligence is expected to increase average price and further drive revenue growth.

Take more measures to empower dealers, and growth goals demonstrate confidence in development. In terms of channels, it is expected to focus on advantageous regions, increase customer share in key regions, and empower dealers through combined strategies such as gold medal shopping guide incubation and store opening subsidies. The company set a target of 30% year-on-year increase in revenue and a net profit target of 331% year-on-year growth for 2024, demonstrating the company's confidence in steady development.

Risk warning: Prices of raw materials fluctuate greatly; risk of bad debts in accounts receivable.