CSC SECURITIES (HK) LTD·2024-05-06 06:30Investment Rating - The report assigns a "Buy" rating for the company, indicating a potential upside of 15% to 35% [7]. Core Insights - The company reported a strong Q1 performance with revenue of 68.98 billion RMB, a year-over-year increase of 6.0%, and a net profit of 4.77 billion RMB, reflecting a 20.2% increase year-over-year [4]. - The company has launched a new employee stock ownership plan aimed at incentivizing key personnel, which is expected to enhance shareholder value [4]. - The company is benefiting from favorable policies such as the domestic appliance replacement program, which is anticipated to support steady growth in sales [5]. Summary by Sections Company Overview - The company operates in the home appliance industry, with a current A-share price of 30.26 RMB as of April 30, 2024, and a market capitalization of approximately 190.9 billion RMB [2]. Financial Performance - Q1 revenue growth was driven by a robust performance in the Chinese market, which saw an 8.1% increase, while international revenue grew by 4% despite weaker growth in Europe and the US [4]. - The gross margin improved by 0.5 percentage points to 29%, and the net profit margin increased by 0.8 percentage points to 6.9% [4]. Earnings Forecast - The company’s net profit is projected to reach 19.46 billion RMB in 2024, 22.76 billion RMB in 2025, and 25.33 billion RMB in 2026, with year-over-year growth rates of 17.3%, 16.9%, and 11.3% respectively [5][6]. - Earnings per share (EPS) are expected to be 2.1 RMB in 2024, 2.4 RMB in 2025, and 2.7 RMB in 2026 [5]. Valuation Metrics - The A-share price-to-earnings (P/E) ratios are forecasted to be 15X in 2024, 13X in 2025, and 11X in 2026, indicating a reasonable valuation [5][6]. - The company is expected to gradually increase its dividend payout ratio, with a projected dividend per share (DPS) of 1.03 RMB in 2024, yielding 3.41% [6].