Performance summary: the company released the semi-annual report for 2022, the company realized revenue of 2.54 billion yuan in the first half of 2022, + 0.9% year-on-year; realized net profit of 130 million yuan,-2.2%; and deducted non-net profit of 90 million yuan,-24.9% of the same period last year. In a single quarter, 2022Q2 achieved revenue of 1.22 billion yuan, year-on-year-10.3%; net profit of 70 million yuan, + 0.7%; and non-return net profit of 40 million yuan,-35.6% of the same period last year. Affected by the domestic epidemic in the first half of the year, the pace of production, delivery and channel promotion slowed down, and revenue growth was temporarily under pressure.

High raw material prices put temporary pressure on profitability and are expected to be repaired quickly after the debt swap is completed. During the reporting period, the company's overall gross profit margin was 34.2%, year-on-year-7.1pp, mainly due to the increase in raw materials and transportation costs.

In terms of expense rate, the company's sales expense rate is 16.3%, which is-5.9ppp compared with the same period last year, which is mainly due to the reduction of business publicity fees and depreciation amortization of assets in the current period. The management expense rate is 7.6%, year-on-year + 1pp, mainly due to the increase in labor costs, consulting service fees and intermediary fees in the current period, and the financial expense rate is 3.5%, year-on-year-0.5pp.

It is mainly due to the increase in exchange earnings caused by changes in the exchange rate of foreign currencies in the current period; the rate of R & D expenditure is 1.9%, which is the same as the same period last year. Overall, the company's net profit margin is 4.9%, year-on-year-0.2pp. in terms of single-quarter data, 2022Q2 gross profit margin is 32.8%, year-on-year-6.6ppm, and net profit rate is 5.5%, year-on-year + 0.6pp. In the first half of 2022, the company's net operating cash flow was 150 million, year-on-year + 79.5%; receivables 240 million, year-on-year + 36.6%; and at the end of the period, the company received 20 million yuan in advance (contract liabilities), + 41.8% compared with the same period last year. In the first half of the year, the company formally introduced Hillhouse Capital as a subsidiary shareholder, and the capital increase will be mainly used for the replacement of interest-bearing debt of the subsidiary, which is expected to be completed by the end of the year. After completing this round of debt swap, the company will further reduce the total amount of interest-bearing liabilities. At the same time, with the continued improvement of the company's operating conditions, the interest rate on the remaining debt will also be reduced, and it is expected that the company's financial expenses will be significantly reduced at that time, raising the overall profit level.

Ekornes has maintained a bright growth rate, and the product structure has been further optimized. From a regional point of view, H1 company's revenue from export / domestic sales in 2022 was 1.87 billion yuan respectively, compared with the same period last year, with a strong growth rate of export revenue.

Of these, Stressless / IMG/Svane achieved revenue of 1.43 billion yuan respectively, with revenue of 1.39 billion yuan, compared with the same period last year. In the first half of the year, Ekornes maintained a good growth momentum under the pressure of consumer demand in overseas markets. Mainly due to: 1) comfort chair products continue to bring forth new ideas, and same-store sales grow steadily; 2) non-comfortable chair products, including soft sofas, electric chairs, soft-bag dining chairs and other products, continue to maintain rapid growth, channel penetration continues to increase 3) the development of the Chinese market has progressed steadily, and the domestic market of Ekornes has achieved triple-digit growth in the first quarter, and maintained a rapid growth rate in the first half of the second quarter under the influence of the epidemic. 4) mattress products have expanded globally since Q2 in 2022, starting from Europe. In the second quarter, while raw material costs and shipping prices remained high, the company's products generally increased prices by 60.8%, effectively hedging the risk of rising raw material costs, and it is expected that with the impact of price increases, Ekornes gross profit margin is expected to be repaired.

Qumei headquarters is under pressure from the domestic epidemic in the short term and is expected to improve marginally in the second half of the year. In the first half of the year, Qumei's revenue reached 620 million yuan,-32.8% compared with the same period last year, mainly due to the company's logistics and transportation, direct distribution channel operation and B2B project delivery rhythm affected by the epidemic to varying degrees. Looking forward to the follow-up, the strength and channel ability of the company's domestic products have been improved: 1) in terms of products, the development of new products, the launch of products such as "Hewan", "gathering wood", "such as finding", enriches the company's product matrix; 2) in terms of channels, encourage new dealers and small businesses to open individual stores, reduce the difficulty of operation and investment intensity, and improve the survival rate and profitability of new and small businesses. At the same time, big businessmen and strong businessmen continue to give full play to the advantages of the "full category one-stop" business model to improve customer unit value and joint and several rates; 3) optimize the existing product materials, hedge the impact of rising raw material prices, simplify and optimize SKU, and improve production efficiency. As the impact of the epidemic weakens, the growth rate of the company's domestic sales in the second half of 2022 and 2023 is expected to improve.

Profit forecast and investment advice. It is estimated that the EPS of the company from 2022 to 2024 will be 0.65,0.86,1.12 yuan respectively, corresponding to 13 times, 10 times and 8 times of PE respectively, maintaining the "hold" rating.

Risk tips: the risk of large fluctuations in raw material prices, the risk of large fluctuations in exchange rates, the risk of intensified international trade frictions, the risk of intensified competition in the industry, and the risk of expanding the scope of the epidemic.