Affected by the epidemic and rising prices of raw materials, the company's income and net profit deducted from non-return in the first half of the year declined compared with the same period last year. The company's 22H1 realized income, net profit attributable to the parent company shareholders and net profit attributable to the parent company shareholders after deduction were 1.726 billion yuan, 68 million yuan and 50 million yuan respectively, down 1.01%, 39.21% and 44.78% respectively from the same period last year. At the same time, the company's 22H1 gross profit margin and net profit margin were 24.45% and 3.66% respectively, down 3.74% and 3.38% respectively from a year earlier. The frequent and sporadic COVID-19 epidemic in the first half of 22 had an impact on the economy, superimposed on the decline in investment in real estate development compared with the same period last year, and the company's income growth was under pressure. underemployment affected the decline in output, and the rise in fuel prices led to a rise in costs, resulting in a decline in gross profit margin, but the rates of sales expenses and management expenses were relatively stable compared with the first half of 21 years.

The company's rebate improved in the first half of 22 compared with the same period last year. The net cash flow generated by the company's operating activities in 22H1 is 83 million yuan, which is significantly better than the-137 million yuan in 21H1. At the same time, the company's 22H1 cash-to-cash ratio and net-cash ratio are 1.03times and 1.31times respectively, which are 0.06times and 2.34times higher than the same period last year, respectively. We believe that the quality of the company's repayment in the first half of 22 years has improved compared with the same period last year.

From the channel end in the first half of 22 years, the company's engineering channels and foreign sales channels have achieved positive growth, while retail channels have declined. The company has three core production bases in Tangshan, Chongqing and Guangxi, and its main brands are "HUIDA Huida", "DOFINY Dufini", "LA'BOBO", "Porta" and "Creo". By channel, the company's revenue from domestic and foreign channels in the first half of 22 years was 1.223 billion yuan and 477 million yuan respectively, accounting for 71.93% and 28.07% respectively, with year-on-year changes of-7.51% and 17.37% respectively. Among them, the revenue of the retail channel 22H1 in the domestic sales channel was 783 million yuan, down 13.07% from the same period last year, accounting for 46.06% of the total income ratio; the engineering channel 22H1 realized revenue of 440 million yuan, an increase of 4.38% over the same period last year, accounting for 25.87% of the total income ratio.

Retail, engineering and home improvement channel layout continues to make steady progress. In the retail channel, the company continues to dig deep and open stores based on merit. As of June 30, 2022, the company has a total of 2056 stores in China, of which 1333 are "HUIDA" brand bathroom products. In the first half of 22 years, the Engineering Channel Company has reached a new strategic cooperation with well-known real estate companies such as Zhongjiao Real Estate, Financial Street, Beijing Tianrun Land Group, Zhongtian Beautiful Group, China Construction Zhidi, China Construction Bureau three companies, Shanghai Construction Engineering and so on. In the home decoration channel, the company headquarters vertical cooperation enables the distribution business to carry out, at the same time for market segmentation, accelerate channel sinking, in-depth excavation, seize the third or fourth level market share, and improve the company's overall market share.

Profitability and valuation. We estimate that the EPS of the company from 2022 to 2024 will be 0.61,0.77,0.91 yuan per share respectively, which is comparable to the median forecast PE of listed companies in 2022 is 24.1 times. Give the company 16-17 times forecast PE in 2022, corresponding to the reasonable value range of 9.76-10.37 yuan per share in 2022, which is "better than the big market".

Rating.

Risk hint. The acceptance of domestic brands by engineering customers is lower than the expected risk, and the risk of a sharp rise in raw material prices.