The company publishes its 2021 semi-annual report results:

21H1: income 3.938 billion (YOY+41%), return to mother 266 million (YOY+79%), deduct 203 million (YOY+37%) [performance is in the median of forecast, forecast return to mother 2.5-280 million]

21Q2: income 1.868 billion (YOY+5.9%), return to mother 160 million (YOY-11%), Koufei 116 million (YOY-35%) Q2 performance decline is expected to be partly affected by tight shipping capacity and freight increases (77% of the company's export) massage business: bottleneck relief, profit increase 1 massage chair: 21H1 income 1.586 billion yuan (YOY+67.34%), of which own brand income 1.064 billion yuan (YOY+54.51%). The contract manufacturing income is 522 million, and the growth rate is expected to be slightly more than 100%. After the release of the bottleneck in the production capacity of massage chairs, the expected increase in the number of orders will lead to a doubling of income, and its own brands also have better restorative growth.

2 massage small electricity: 21H1 income is 1.012 billion (YOY+36.09%), of which private brand income is 293 million yuan (YOY+53.19%), contract manufacturing income is 719 million yuan, the growth rate is expected to be close to 30%. The company's own brand massage small electricity has a better growth rate.

There is a double improvement in supply and demand in the company's massage business, which brings upward opportunities: (1) the production side: the bottleneck of massage chairs is liberalized (from 300000 in 2019 to the current 700000); (2) on the demand side: online massage small electricity + low-cost massage chair market is rising, the massage industry has gradually shifted from the stage of high unit price and lack of consumer awareness to the stage of reasonable performance-to-price ratio and the promotion of consumer awareness.

At the same time, pay attention to the profitability of independent brand massage chairs against the trend. Despite the impact of price increases in raw materials / shipping in the first half of the year, the independent brand of 21H1 massage chairs achieved a net interest rate of 7.54%, an increase of 2.61pct compared with the net interest rate of 4.93% in 2020.

Environmental business and others: short-term profitability decline, focus on new wind growth environmental business: 21H1 revenue 648 million yuan, year-on-year + 54.21%. It is expected that 1 the empty net export business still has a good performance; 2 the domestic fresh air business begins to gradually contribute to the increase.

Short-term gross margin has fallen. The gross profit margin of 21H1 environment business is 18.52%, which is-10.21% compared with the same period last year. It is expected that the air net export business, which is mainly due to the low unit price of passengers, will be affected by the increase in seaborne prices.

Epidemic prevention materials: income is-23.57% compared with the same period last year. The demand for Q2 is expected to decline, and there may be a certain base pressure in the second half of the year.

Overall profitability: although it has the impact of the supply chain, it maintains a stable single Q2 gross profit margin of 31.68%, year-on-year-6.48pct, and net profit rate of 9.22%, year-on-year-0.74pct.

The main reasons for the decline in gross profit margin are as follows: (1) the increase in shipping / exchange rate costs has a negative impact on the company's revenue. (2) the business of high gross profit margin, such as epidemic prevention materials, has declined.

The main reasons for the stability of the net interest rate are as follows: 1 the company manages the exchange rate risk through the forward settlement and sale of foreign exchange, resulting in 68 million of the investment income; 2 the diluted rate of income growth, the rate of Q2 management expenses of the company is 5.02% (YOY-0.86pct), and the rate of sales expenses is 15.13% (YOY-0.9pct).

We expect that the company's profitability may have great potential if short-term problems such as shipping / exchange rate / raw materials are solved.

Investment advice: buy rating.

It is suggested that we should focus on the double optimization of supply and demand side of massage business, which is expected to make the income growth of massage chairs enter a new stage. The profit forecast for 21-23 years is expected to be 6.1,8.4 and 1 billion (the previous values are 5.3,6.9 and 870 million), corresponding to PE16x,12x and 10x.

Risk hint: shipping / exchange rate affects the company's export profits, and the demand for massage chairs is lower than expected.