Event

In 2021, the company realized operating income of 1.186 billion yuan, a decrease of 27.44% over the same period last year; the net profit attributed to the parent company was 40 million yuan, down 81.43% from the same period last year; the non-net profit attributed to the parent company was 33 million yuan, a decrease of 83.42% over the same period last year, and the net operating cash flow was 51 million yuan, a decrease of 87.24% over the same period last year.

2022Q1 achieved an operating income of 322 million yuan, a decrease of 3.34% over the same period last year; a net profit of 2 million yuan attributed to the parent company, a decrease of 95.14% over the same period last year; and a deduction of 1 million yuan in non-net profit from the parent company, a decrease of 96.31% over the same period last year, and the net operating cash flow was-26 million yuan, an increase of 44.22% over the same period last year.

In 2021, the business of receiving masks and OEM of baby care products has a great impact. The development company that is optimistic about the business of self-branded adult incontinence products for a long time is the leading manufacturer of disposable sanitary products in China, using ODM+ 's own brand two-wheel drive mode of operation; the dominant position of ODM will not change in the short term. From the perspective of product business, ODM business products are mainly the production of baby care products and pet hygiene products, independent brand business is mainly adult products. Revenue in 2021 was mainly affected by the decline in revenue related to baby care products, at the same time, with the gradual improvement of the epidemic, mask sales continued to decline, also had a certain impact on the company's revenue. Excluding the impact of income from epidemic prevention materials, the company's revenue in 2021 decreased by 19.01% compared with the same period last year. Excluding the impact of income from epidemic prevention materials, the independent brand business actually achieved an increase of 6.15% compared with the same period last year, and the decline of ODM business also narrowed.

From a quarterly point of view, except for the increase in the first quarter compared with the same period last year, the year-on-year decline in 2021 decreased year on year. Excluding the influence of epidemic factors, because 202Q4 is the peak season in winter (hot summer will reduce product use to a certain extent) and consumption festival promotion activities at the end of the year, the year-on-year decline has narrowed compared with the previous two quarters, but the traditional peak season advantage is not obvious. Combined with the 2020 sales data disclosed by the company, we can see that the impact of mask business on the company is mainly concentrated in Q2mem2020Q4, which is basically the same as that of Q1, reducing to less than 10 million yuan. 2022Q1 achieved operating income of 322 million yuan, although there was a slight decline compared with the same period last year, but compared with 2021Q4, it increased by 0.94% month-on-month. It was the first time since 2018 that the company's single-quarter sales performance of Q1 was better than that of Q4 at the end of last year. To a certain extent, it shows that the company is gradually coming out of the cold winter.

In 2021, the gross profit margin of sales was 18.64pct, which was lower than that of the same period last year (9.19pct). During this period, the expense rate increased by 3.90pct / 2022Q1 to realize the gross profit margin of sales 12.07pct, the year-on-year decrease of 13.30pct, and the increase of 0.58pct during the period.

In 2021, the company achieved a gross sales margin of 18.64%, a sharp decline from the same period last year. On the one hand, the ODM business is characterized by low gross margin, and in order to promote its own brand (such as adult incontinence products), the company will appropriately reduce the gross margin to make a profit; on the other hand, the sales of the mask business, which enjoys the highest gross margin, has dropped sharply, so the gross profit margin has undergone a structural change.

The company's expense rate during 2021 increased by 3.90 percentage points compared with the same period last year. Among the expenses during the period, the rate of sales expenses increased the most, accounting for 3.64% of sales revenue over the same period last year, mainly due to marketing expenses (a sharp increase of 17.5042 million yuan to 60.0768 million yuan over the same period last year) and an increase in human resources costs. At the same time, the 1.61% increase in administrative expenses as a share of sales revenue over the same period last year is mainly due to the cancellation of tax and social security concessions in 2020 and the increase in listing fees and depreciation expenses in 2021. The decrease in financial expenses was mainly due to interest income (down 10.2948 million yuan to-12.6485 million yuan compared with the same period last year) and exchange gains and losses (down 17.0055 million yuan to 4.3736 million yuan compared with the same period last year).

During the first quarter of 2022, the cost increased by 0.58% compared with the same period last year, the company continued to expand its own brand market, the related sales expenses continued to rise, the management expenses increased slightly, and the remaining expenses were not much different from those in the same period.

Smart selection of ODM quality customers + independent brand dual-drive model, continue to enhance the brand power company to cultivate its own brand + ODM two-wheel drive strategy, and constantly improve its own brand business. In the field of disposable sanitary products, the company diversifies its business layout to cope with industry changes and demographic changes calmly. In the field of ODM, the company provides a full range of services for brand customers, focusing on strategic win-win with customers on the basis of in-depth understanding of industry trends and customer needs. Over the years, through the continuous optimization of product solutions, the company has established a good reputation in the industry and maintained a number of stable and high-quality ODM customers, making the company has a strong customer advantage in the industry.

At present, the company has become a leader in adult incontinence products in China and one of the leading brands in the supply chain solution of baby diapers.

In 2021, in order to further activate the brand power and continue to enhance brand awareness and market reputation, the company started a brand upgrade plan with Shanghai Hua Hua Marketing Consulting Co., Ltd. to create the concept of "dynamic elderly" and lead the new experience of enjoying the old and living. Efficiently enhance the value of the brand.

Relying on the strength of independent innovation and scientific research advantages to create a rich product structure in 2021 the company participated in the formulation and release of 5 national standards and 3 industry group standards. The company's R & D team has rich experience, has a solid R & D foundation and strong R & D capability, and continues to carry out product innovation. The team has accumulated a number of core technologies through independent research and development, and has been successfully applied to product production. At present, the company has a total of 256 patents, including 45 invention patents and outstanding R & D capabilities, and has been rated as the national intellectual property advantage enterprise, the top 100 innovative enterprises in Zhejiang Province, and the second batch of "Little Giant" enterprises specialized by the Ministry of Industry and Information Technology. Thanks to the continuous R & D investment, in the field of independent brands, the company has formed a product echelon with rich categories, excellent product structure and good market prospects. And the company continues to optimize and adjust the product structure, increase the R & D and marketing expansion of middle and high-end products to meet the consumption concept of gradual upgrading of users. In 2021, the company applied for and won 1 excellent industrial product in Zhejiang Province and 2 high-quality products in Hangzhou. In view of the awakening consumer awareness of mild incontinence groups, the company has launched invisible water-absorbing towels and invisible trousers specially designed for Asian women, as well as professional men's water-absorbing towels, further expanding the product category and promoting the development of independent brand business.

Investment suggestion

The company adopts the development model of "ODM+ independent brand" and is engaged in the business of disposable sanitary products, the main products include infant care products, adult incontinence products and pet hygiene products and masks, among which infant hygiene products and adult incontinence products account for the highest proportion, and adult incontinence products gradually become the leading business of the company. From the product point of view, the company provides safe, comfortable and high-quality personal health care products for consumers of all ages, and the steady development of self-operated adult incontinence products, it will become the main driving force for the company's revenue growth and profitability in the future. From the perspective of channels, the company implements the development strategy of "direct retail expansion and e-commerce construction", optimizes dealers' channels offline, innovatively introduces the construction of direct retail channels, and preemptively occupies the dividends of direct retail channels. On the other hand, as one of the earliest companies to enter the e-commerce channel in the field of adult incontinence, the company actively improves the construction of online e-commerce channel and builds a "reliable well-being" one-stop pension procurement platform to further deepen the company's voice and brand influence in the old-age care industry. To sum up, we predict that in 2024, the company will achieve revenue of 15.42 billion yuan, net profit of 0.77 million, 1.28 billion, PS of 2.55, 2.07, and EPS of 0.28, 0.47 and 0.64 yuan per share respectively in 2024, maintaining the "recommended rating".

Risk hint

The risk that the conversion of consumer health awareness and consumption habits is less than expected; the direct retail channel is not as expected; the revenue of major customers is not as expected; the risk of raw material price fluctuations.