Core views:

Boss Electric released its 2024 mid-year report. 24H1 operating income of 4.73 billion yuan (YoY -4.2%); net profit due to mother 0.76 billion yuan (YoY -8.5%). Gross profit margin 48.9% (YOY-3.1 pct), net profit margin to mother 16.1% (YOY-0.8pct). 24Q2 quarterly revenue of 2.49 billion yuan (YoY -9.6%); net profit to mother 0.36 billion yuan (YoY -18.2%).

24H1 The kitchen appliance industry is under overall pressure due to real estate, and Boss Electric Appliance's leading position is stable. On the industry side, according to Aowei data quoted in the company's report, the completed 24H1 residential area was 192.59 million square meters, a year-on-year decrease of 21.7%, leading to a marked decline in new demand in the kitchen appliance industry. Despite the overall pressure on the industry, Boss Electric Appliance's market share is still stable. According to Aowei's offline report, the market share of retail sales and retail sales of range hoods of the boss brand was 31.9% and 26.1%; according to the Aowei online report, the market share of retail sales and retail sales of the owner brand's kitchen appliance package was 27.0% and 20.9%; they all ranked first in the industry.

Overall profitability is under pressure, and gross margins of range hoods and gas stoves have declined. 24H1 gross margin was 48.9% (Yoy-3.1 pct). The decline in gross margin may be due to changes in revenue structure and channel structure.

By product, the gross margin of the 24H1 range hood is 50.8% (YOY-4.3pct), and the gas stove is 53.0% (YOY-3.5pct). In terms of expenses, 24Q2 sales/management/finance/R&D expenses were 23.8%/4.7%/-1.8%/4.4%, respectively, -1.2pct/+0.7pct/-0.5pct/+0.6pct compared to the previous year, with a net profit margin of 14.5% (YoY-1.5pct).

The company plans to implement mid-term dividends to increase shareholder returns. To increase shareholder returns, the company plans to pay a cash dividend of 5 yuan (tax included) for every 10 shares, totaling 0.47 billion yuan, with a semi-annual dividend payment rate of 62%.

Profit forecast and investment advice: Net profit to mother is expected to be 1.63, 1.78, and 1.91 billion yuan respectively in 24-26, with year-on-year growth rates of -6.1%, 9.7%, and 7.3%, respectively. The latest closing price corresponding to 2024 PE is 11.19x. Referring to comparable company valuations and dividend levels, the company was given 12 times PE in 2024, corresponding to a reasonable value of 20.68 yuan per share, giving it an “increase in holdings” rating.

Risk warning: Increased market competition, fluctuating raw material prices, risk of fluctuations in the real estate market.