ECOVACS(603486) 华福证券·2024-06-12 02:00Investment Rating - The report initiates coverage on Ecovacs with a "Buy" rating, citing the company's strategic adjustments and potential for performance recovery [2][22] Core Views - Ecovacs has grown into a global leader in home service robots and smart home appliances, with a dual-brand strategy of Ecovacs (service robots) and Tineco (smart home appliances) contributing 50% and 49% of revenue respectively in 2023 [1][8] - The domestic floor-cleaning robot market has rebounded, with online sales increasing by over 30% YoY in Q1 2024, indicating a renewed growth phase [1][13] - Ecovacs' market share in floor-cleaning robots has started to recover after the launch of the T30 series, with sales and volume market shares reaching 31% and 26% respectively in March 2024 [1][14] - Despite ongoing price wars in the floor-cleaning machine market, Tineco's market share has stabilized at around 40% [1][15] Business Performance and Strategy - Ecovacs' revenue grew by 1.2% YoY to RMB 15.5 billion in 2023, but net profit attributable to shareholders dropped by 64% due to strategic missteps in product offerings and increased investment in new business areas [9] - The company has adjusted its strategy, focusing on cost-effective products and expanding its offline and overseas markets, leading to a recovery in profitability in Q1 2024 with a net profit margin of 8.6% [9][11] - Ecovacs' offline sales network in China has expanded to over 2,500 stores, with coverage reaching 84.2% in first-tier and new first-tier cities [17] - Overseas revenue for Ecovacs and Tineco grew by 20.1% and 40.5% respectively in 2023, accounting for 38.8% and 42.1% of their total revenues [17] Industry Trends - The floor-cleaning robot industry is experiencing a steady rebound, with online sales increasing by 30%, 16%, and 60% YoY in January, February, and March 2024 respectively [1][13] - The floor-cleaning machine industry has seen a 26% decline in average online prices from January 2023 to March 2024, due to increased competition and price wars [1][15] Financial Forecasts - Revenue is expected to grow by 13.3%, 13.2%, and 12.9% YoY in 2024, 2025, and 2026, reaching RMB 17.56 billion, RMB 19.87 billion, and RMB 22.43 billion respectively [18][19] - Net profit attributable to shareholders is forecasted to increase by 126%, 22%, and 17% YoY in 2024, 2025, and 2026, reaching RMB 1.38 billion, RMB 1.69 billion, and RMB 1.98 billion respectively [2][21] - Gross margins for the service robot and smart home appliance businesses are expected to stabilize at around 48% and 50% respectively from 2024 to 2026 [18][19] Valuation - The report uses a comparable company valuation method, with Ecovacs' 2024-2025 PE ratios of 20.7x and 17x being lower than the industry average of 25x and 22.1x [2][22]