Event: the company disclosed its 2021 annual report that its annual operating income increased by 22.87% year-on-year to 4.712 billion yuan, its net profit increased by 3.11% to 376 million yuan, and non-net profit increased by 6.87% to 324 million yuan over the same period last year. In the first quarter of 2022, the company's operating income rose 6.67% year-on-year to 1.138 billion yuan, net profit fell 7.41% to 96.1221 million yuan, and non-net profit decreased 10.89% to 85.1009 million yuan. The comments are as follows:

Revenue growth for the whole year is steady, and the growth rate of net interest rate has slowed down due to the rise in raw material prices and other factors.

In 2021, the company's operating income increased by 22.87% year-on-year to 4.712 billion yuan, net profit increased by 3.11% to 376 million yuan, and non-net profit increased by 6.87% to 324 million yuan. 1) Q4 performance fell by 28%. In the fourth quarter alone, the company achieved operating income of 1.212 billion yuan, an increase of 5.07% over the same period last year; net profit of 75.0156 million yuan, down 27.96%; and non-net profit of 55.9484 million yuan, down 24.63% from the same period last year. 2) the growth rate of operating costs in all business sectors is faster than that of revenue. In terms of products, the operating income / operating cost of kitchen and bathroom products in 2021 was 3.222.455 billion yuan, an increase of 31.2% over the same period last year, 39.42% over the same period last year; the operating income / operating cost of net aquatic products was 594 million yuan, an increase of 14.73% and 21.41% over the same period last year; and the operating income / operating cost of other household products was 671 million yuan, an increase of 2.46% 8.32% over the same period last year. The operating income / operating cost of non-household products was 148 million yuan, an increase of 5.08% and 11.56% over the same period last year. 3) affected by the rise in raw material prices, the company's gross profit margin decreased by 4.17pct to 22.76% compared with the same period last year. Among them, the gross profit margin of kitchen and sanitary products / clean aquatic products / other household products / non-household products respectively decreased 4.49/4.30/4.37/4.54pct compared with the same period last year. The company's main raw materials include plastic raw materials, metal materials and filter materials, as well as related spare parts, commissioned processing, packaging materials, purchased products, mold parts and auxiliary materials. Direct material cost accounts for more than 60% of the company's main business cost. Direct material cost rose 30.43% in 2021, which has a great impact on the company's gross profit level. 4) sales of kitchen and bathroom products increased by 21.97% compared with the same period last year. In 2021, the production / sales of kitchen and sanitary products of the company was 3.76 million, up 21.35% and 21.97% over the same period last year; the net production / sales of aquatic products was 960.40 million, 9.655 million PCS, down 12.58% and 13.75% over the same period last year; and the production / sales of other furniture products was 1.78 million, an increase of 22.64% and 33.35%, respectively. The production / sales of non-household products was 1443.06, 13.71.81 million PCS, an increase of 18.13% over the same period last year.

The performance in the first quarter was better than that in the fourth quarter of last year. In the first quarter of 2022, the company achieved operating income of 1.138 billion yuan, an increase of 6.67% over the same period last year, an increase of 1.60pct over the fourth quarter of 2021; net profit of 96.1221 million yuan, down 7.41% from the same period last year, 20.55pct; deducting 85.1009 million yuan of non-net profit, down 10.89% from the same period last year, the decline narrowed 13.74pct. In terms of cash flow, the net cash flow generated by the company's operating activities in the first quarter of 2022 was 123 million yuan, from negative to positive compared with the same period last year.

Deep ploughing overseas markets, revenue is growing steadily. The company has been ploughing the overseas market for many years, and the pace of internationalization is steady and strong. In 2021, the company will accelerate the development of new products and customers, expand the product lineup and increase market share, and strengthen the operation capacity of overseas manufacturing base in Thailand. As the demand for overseas household products is still on the rise, the US economic stimulus package has been implemented, and the Southeast Asian supply chain has been affected by the epidemic to prompt customers to transfer orders to China, overseas business has been further strengthened. During the reporting period, the company overcame the effects of exchange rate fluctuations, rising raw materials and freight costs, and repeated epidemics, and achieved operating income of 3.678 billion yuan in overseas markets, an increase of 24.32% over the same period last year, accounting for 78.06% of total revenue. The operating income of the domestic market was 998 million yuan, an increase of 17.45% over the same period last year.

Equity incentive sets a higher growth target, and the exercise price is 13.78 yuan, slightly higher than the current stock price level.

In November 2021, the company issued a 2021 stock option and restricted stock incentive plan (draft), which intends to grant a total of 5 million shares to the incentive object, involving RMB A common shares, accounting for about 1.12% of the company's total share capital at the time of the announcement of this incentive plan. The exercise price of the stock options granted under this incentive plan is 13.78 yuan per share, and a total of 60 people are granted for the first time, including directors, senior managers, core and backbone personnel and other personnel that the board of directors deems necessary to encourage. The evaluation year of this incentive plan is three fiscal years from 2022 to 2024. The annual performance evaluation targets of the first granted stock options are respectively based on the company's 2021 net profit, and the growth rate of net profit in 2022, 2023 and 2024 is not less than 20%, 35% and 45%. Assuming that the company grants incentive stock options for the first time in early December 2021, the cost amortization expenses of stock options granted from 2021 to 2024 are 11.22,129.72, 72.38 and 323100 yuan, respectively.

Investment advice: annual revenue growth is good, quarter-on-quarter performance improved, maintain overweight rating. It is estimated that the company's net profit from 2022 to 2024 will reach 4.52,5.15 and 580 million yuan respectively, an increase of 20%, 14% and 13% over the same period last year, corresponding to the PE valuation of 12, 11 and 9 times. The company focuses on and deeply ploughs the large health industry to build a diversified development pattern such as "healthy family life", "commercial engineering", "intelligent customization" and so on.

To "technology-driven, healthy development, brand precision" three-wheel drive as the development strategy, fund-raising projects to release capacity increment space.

Risk tips: intensified competition in the industry; raw material price fluctuation risk; downstream demand downturn risk; market demand lower than expected risk; real estate regulation risk; growth risk after fund-raising project is put into production.