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2024 results are in line with our expectations

The company announced the 2024 results: revenue in 2024 will be 11.945 billion yuan, a year-on-year increase of +38.03%; The net profit attributable to the parent company was 1.977 billion yuan, a year-on-year increase of -3.64%. Corresponding to 4Q24, the company's revenue was 4.938 billion yuan, a year-on-year increase of +66.5%; The net profit attributable to the parent company was 504 million yuan, a year-on-year increase of -27.0%. The company's 2024 results are in line with our previous performance report and our expectations. The company announced the profit distribution plan: it plans to distribute a cash dividend of 10.7 yuan per 10 shares, with a total cash dividend of 197 million yuan, corresponding to a cash dividend rate of 10%.

4Q24 The company's domestic and foreign sales exceeded market expectations. Domestic sales: Exceeding expectations came from the stimulation of national subsidies, we estimate that domestic sales in 4Q24 were +90% year-on-year, of which sweepers were +50% year-on-year, and floor scrubbers/washing machines achieved triple-digit year-on-year growth. Exports: The out-of-expectations came from a more aggressive marketing strategy, and we estimate that the overall overseas revenue in 4Q24 was more than +50% YoY. 1) Europe: The company increased marketing investment and decentralized product price bands, while continuing to increase the proportion of online direct sales. We estimate that Europe's 4Q24 revenue will be more than +50% year-on-year, of which the revenue growth rate of offline channels will turn positive significantly, and online self-operation will continue to grow at a high rate year-on-year. 2) United States: Expanding the price band online to further seize the share, and the promotion of offline channel distribution has brought incremental growth, and we estimate that the company's US 4Q24 revenue is +70% year-on-year. 3) Asia-Pacific: The company maintains a competitive advantage in markets such as South Korea, Turkey, and Singapore, and has begun to explore the Southeast Asian market, and we estimate that Asia-Pacific 4Q24 revenue is +30% year-on-year.

To profit income, the effect is concentrated in 4Q24. Since the middle of 24 years, the company's strategy of market expansion and channel investment has been more active, and the effect of exchanging profits for scale is concentrated in 4Q24: the company's gross profit margin in 4Q24 was 45% (-12ppt year-on-year, -9ppt month-on-month), mainly due to the price reduction of old sweepers, the increase in the proportion of floor scrubbers/washing machines with low gross profit margins, and the impact of accounting standard adjustments. The sales expense ratio in 4Q24 was 28% (+5ppt year-on-year, +2ppt month-on-month), mainly due to the increase in domestic investment in emerging channels, overseas brand marketing efforts, and the increase in the proportion of self-management. In addition to the above impacts, we estimate that the negative impact of US tariffs on net profit margin in 4Q24 is 10% (-13ppt YoY, -3ppt QoQ).

Development Trends

We expect the company to continue its aggressive strategy in 2025. 1) Source of revenue growth: 25 years of national subsidies have continued, and the online sales of stone sweepers/floor scrubbers have achieved high growth since the beginning of the year; The company continued to broaden the price band and lay out incremental channels (such as Douyin, Amazon in Europe, offline in the United States, etc.); Blank market development.

2) Profit margin improvement path: continuous expansion of the high-end market, the layout of new products in the low-price range, the increase of global market share to bring scale effect, and the improvement of marketing and channel refinement management. However, in the short term, margins are still affected by the increase in the proportion of low-margin products and channels, as well as the US tariffs.

Earnings Forecast & Valuation

We keep our 2025/2026 earnings forecast unchanged. The current share price corresponds to 18.1x/15.3x 2025/2026 P/E. Maintain the Outperform rating and the target price of $300 unchanged, corresponding to 24.0x/20.3x 2025/2026 P/E ratio, which is 32.7% upside from the current share price.

Risk

: The risk that the market demand is less than expected; the risk of intensifying market competition; Tariff policy risk.