2022 results slightly exceeded our expectations
The company announced its 2022 results: operating income of 2,744 million yuan, +5.5% year on year; net profit of 347 million yuan, +49.8% year on year; annual dividend of 0.4 yuan/share, dividend rate of 46.2%. Corresponding to 4Q22 revenue of 750 million yuan, +7.3% year on year; the net profit of the mother was 73 million yuan, +112.7% year on year. The company's performance slightly exceeded our expectations, mainly due to better-than-expected sales of 2H22 vacuum cleaners and increased profits from exchange earnings.
Revenue is growing steadily, and the structure is gradually diversifying. 1) The company mainly focuses on the ODM business of cleaning appliances. In 2022, the European and American markets began to remove inventory. Exports of home appliances were under pressure. The export volume of vacuum cleaners was -25% year on year (General Administration of Customs), but the company still achieved steady revenue growth by relying on high-quality customers and competitive products. 2) The company's vacuum cleaner business achieved revenue of 2.69 billion yuan in 2022, +4.5% year on year. From a structural perspective, the wired category performed better than the wireless category. 1H22 wireless/wired vacuum cleaner revenue was -0.9%/+17.9%, respectively, and 2H22 was -0.4%/+30.5%, respectively; 3) The company continued to promote customer structure and category diversification strategies. Among them, the sweeping robot business progressed smoothly, achieving revenue of about 47 million yuan in 2022, an increase of more than 300% over the previous year. Furthermore, the V series of floor washers developed by the company in collaboration with Fangtaimibo focuses on differentiated selling points, with cumulative online retail sales exceeding 100 million yuan in 2022 (AVC data).
The recovery in gross margin is obvious, and profit benefits from exchange rate fluctuations. 1) The company's export business is mostly settled in US dollars. In 2022, the company's exchange income from exchange rate fluctuations was about 60 million yuan, accounting for ~ 17% of the net profit returned to the mother that year. Excluding exchange rate factors, the company's net profit returned to the mother in 2022 was +24%, mainly due to an increase in gross margin; 2) Benefiting from the decline in raw material costs and shipping costs, compounded by improvements in the company's own product structure, the company's overall gross margin in 2022 was +3.3ppt to 20% year-on-year, where the company's overall gross margin was +3.3ppt to 20% year-on-year, with the exception of financial expenses; 3) With the exception of financial expenses, the cost rate control for other periods was relatively good; The overall net interest rate was +3.7ppt to 12.6% year on year, and cash flow from operating activities recovered.
Development trends
Manufacturing advantages have been highlighted, and new tracks and new categories continue to be developed. The company has strong manufacturing advantages in PCBA/mold/motor/injection molding, etc., and continues to expand new categories to generate revenue growth based on this. In 2022, the company invested in Shenzhen Xihe Future and plans to produce household energy storage products for it. The company expects household energy storage products to begin to be released in 2023, and production of commercial beauty devices is also expected to gradually expand. Furthermore, the company plans to add new categories such as household medical products, and we expect the company's revenue and customer structure to continue to be optimized in the future.
Profit forecasting and valuation
Considering the low continuity of the company's exchange earnings and the risk of removing inventories from Europe and the US, we lowered the 2023 profit forecast by 12% to 328 million yuan, and introduced the 2024 profit forecast of 361 million yuan for the first time. The current stock price corresponds to 2023/2024 25x/23 times P/E. Maintaining an outperforming industry rating, the target price is basically the same as the current price, corresponding to 25 times/23 times P/E in 2023/2024.
risks
High concentration of single customers, fluctuations in the international trade environment, fluctuations in raw material costs and exchange rates.