ECOVACS(SH:603486) Guotou Securities·2024-04-28 10:30Investment Rating - The report upgrades the investment rating for Ecovacs to Buy-A with a target price of 61.00 CNY for the next six months, corresponding to a PE valuation of 25x for 2024 [2][3]. Core Views - Ecovacs has shown significant improvement in profitability in Q1 2024, with a net profit of 3.0 billion CNY, despite a year-on-year decline of 8.7%. The company is expected to gradually recover its operational performance driven by new product launches [1][2]. - The revenue growth rate in Q1 2024 improved by 11.8 percentage points compared to Q4 2023, indicating a positive trend despite previous challenges in the domestic market [1][2]. - The company is focusing on enhancing its product mix and market presence in the domestic market while continuing to expand its overseas business, which has shown strong growth [1][2]. Summary by Sections Financial Performance - In Q1 2024, Ecovacs reported a revenue of 34.7 billion CNY, a year-on-year increase of 7.4%, while Q4 2023 revenue was 49.7 billion CNY, down 4.4% year-on-year [1]. - The gross margin for Q1 2024 was 47.2%, showing a recovery from Q4 2023, which was 46.5%. However, it still reflects a year-on-year decline of 3.5 percentage points [1][2]. - The net profit margin for Q1 2024 was 8.6%, which is a significant recovery from the previous quarter's 0.2% [1][2]. Cash Flow - The net cash flow from operating activities in Q1 2024 was 0.8 billion CNY, an increase of 0.6 billion CNY year-on-year, indicating positive cash flow despite a decline in net profit [2][6]. Future Outlook - The report anticipates a recovery in the vacuum cleaner industry in 2024, with Ecovacs adjusting its operational strategies to restore profitability [2][3]. - The projected earnings per share (EPS) for 2024 to 2026 are 2.44 CNY, 2.80 CNY, and 3.04 CNY respectively, reflecting a positive growth trajectory [2][3].