Description of the event
The company disclosed the 2023 annual report & 2024 quarterly report: The company achieved revenue of 203,979 billion yuan in 2023, up 7.93% year on year, realized net profit of 29.017 billion yuan, up 18.41% year on year, realized net profit deducted from non-return mother of 27.565 billion yuan, up 14.92% year on year. Of these, Q4 achieved revenue of 48,972 billion yuan, up 18.01% year on year, and realized net profit of 8.925 billion yuan. The year-on-year increase was 54.09%; the company achieved revenue of 36.364 billion yuan in 2024Q1, an increase of 2.56% over the previous year, and achieved net profit attributable to mother of 4.675 billion yuan, an increase of 13.77% over the previous year, and realized net profit after deduction of 4.525 billion yuan, an increase of 21.5% over the previous year. In addition, the company will distribute a cash dividend of 23.8 yuan (tax included) for every 10 shares to all shareholders in 2023.
Incident comments
Overall revenue has maintained resilient growth, and the small household appliances business stage is under pressure. The company's revenue in 2023 increased 7.93% year on year, with domestic sales/export/other businesses respectively +15.22%/+7.02%/-17.89%; by business, with the exception of small household appliances and other businesses, all other business segments increased. Among them, the core revenue of the air conditioning core business increased 12.13% year on year. Although the company's household air conditioning sales share declined slightly year on year, the overall scale of the industry increased significantly. According to AVC (AVC) summary data, online and offline retail sales of China's household air conditioning industry in 2023 were +15.8 %/ +4.2%. Revenue from the industrial products business increased sharply by 31.63% year on year, mainly due to the recovery in domestic and foreign demand for white electricity. Furthermore, revenue from ecological agriculture and green energy services/intelligent equipment business was +51.16%/+55.03%, respectively, while revenue from the small household appliances business declined further by 12.39% from the smaller base last year. Mainly, terminal consumption tends to be rational, and categories that prefer optional consumption have declined significantly. 2024Q1's revenue increased 2.56% year over year, or mainly benefited from the resilience of overall demand in the white electronics industry, and the company still maintained its dominant market position.
The scale effect drives gross margin optimization, and profitability continues to increase. The company's gross margin increased sharply by 4.53 pct year on year in 2023. Among them, the main air conditioning business improved significantly. The gross margin of this business increased 4.6 pct year over year, or benefited from scale effects and product structure optimization. In terms of expense ratio, the company's sales expense ratio in 2023 increased by 2.43 pct year on year, mainly affected by a sharp increase in product installation and maintenance costs. The management cost ratio increased 0.42 pct year on year, and the R&D cost rate was basically the same as the previous year. It is worth noting that the negative impact of the company's asset impairment losses on performance increased significantly, mainly due to large inventory price drop losses, which combined contributed to the company's operating profit (gross profit - taxes and additional - sales expenses - R&D expenses + credit and asset impairment losses) increased 13.32% year on year; based on this, The company's financial expense ratio was optimized by 0.56 pct year on year, mainly due to an increase in interest income, which ultimately increased the company's net profit margin to mother by 1.26 pct year on year in 2023. The company's 2024Q1 gross margin increased 2.04 pct year on year, and the sales/management/R&D/finance expense ratios were +0.01/+0.66/-0.24/-0.98pct year on year, respectively, making the 2024Q1 net profit margin +1.27 pct year on year, and the profit quality remained at a high level.
Investment suggestions: The company has formed multiple industrial brand matrices, covering the two major fields of consumer goods and industrial equipment, and has extended the upstream and downstream layout of the industrial chain. Based on this, the company actively explores market segmentation needs, broadens business scenarios, and actively expands potential businesses such as new energy and intelligent equipment. We expect the company's net profit to be 319.45, 345.70, and 37.934 billion yuan respectively in 2024-2026, corresponding to PE of 7.38, 6.82, and 6.22 times, respectively, to maintain a “buy” rating.
Risk warning
1. Risk of macroeconomic fluctuations affecting the company's sales revenue; 2. Risk of profit fluctuations due to price fluctuations of factors of production such as raw materials.