Performance review

The company's performance fell short of our expectations

The company announced 2022 and 1Q23 results: 1) The company's revenue for 2022 was 2,940 million yuan, -16.2% year on year; net profit of the mother was 78.73 million yuan, net profit of the mother after deduction was 98.75 million yuan. Losses all narrowed year-on-year. Corresponding to 4Q22 revenue of 721 million yuan, or -31.1% year on year; the net profit of the mother was 71.07 million yuan, and the net profit of the mother after deduction was 85.44 million yuan. The losses all narrowed year-on-year. 2) 1Q23 revenue was 588 million yuan, -21.9% year on year; net profit of the mother was -3893 million yuan, the loss increased year-on-year; net profit of the mother after deduction was 47.16 million yuan, and the loss increased year-on-year. The company's 2022 and 1Q23 results fell short of our expectations, mainly due to continued pressure on export revenue and profitability being dragged down by the robotics business.

Development trends

Export sales dragged down performance: 1) The company's export revenue in 2022 was -23.3% year on year, corresponding to 2H22 -46.8% year on year. The sharp decline in the company's export sales was mainly due to overseas macroeconomic pressure and the sharp decline in orders due to retailers' removal of inventory, which dragged down performance. We estimate that export sales revenue continued a sharp downward trend in 1Q23, which was the main factor dragging down revenue performance. 2) Benefiting from lower raw material costs, the company's export gross margin was +5.1ppt to 23.4% year on year in 2022, and 2H22 export gross margin was +10.8ppt year on year.

Domestic sales are beginning to show a recovery trend: 1) The company's domestic sales revenue in 2022 was -7.5% yoy, 2H22 +9.9% yoy, and the growth rate was corrected in the second half of the year. We estimate that domestic sales will continue to recover in 1Q23. 2) The company's cookware/small appliances/robotics business revenue in 2022 was -21.4%/-13.9%/+41.4%, respectively, accounting for 72.4%/12.6%/12.1% of total revenue. Corresponding to 2H22 cookware/small appliances/robot business revenue was -36.9%/-4.5%/+112.2%, respectively. The cookware business was mainly due to the decline in export OEM, and the small household appliances and robot business improved significantly in 2H22. 3) The gross margin of 2H22's domestic sales was 28.9%, -0.3ppt compared to the previous year, mainly due to the faster growth of the small household appliances and cookware business, which had a lower gross margin.

Financial analysis: 1) In 2022, the company's overall gross margin was +2.6ppt to 27.6% year on year, and 4Q22/1Q23 gross margin was +7.4/+1.8ppt year-on-year to 29.1%/29.5%, mainly due to declining raw material costs and an increase in the share of domestic sales business. 2) In 2022, the company's sales/management/R&D expenses ratio was +2.0/+1.1/+0.1ppt to 17.1%/7.3%/5.3%, respectively, mainly due to a significant decline in revenue, making it difficult to dilute costs.

3) The net interest rate to the mother in 2022 was -0.2ppt to -2.7% year on year, and the net interest rate to the mother in 1Q23 was -3.1ppt to -6.6% year on year. Continued losses were mainly due to the difficulty of making a profit in the robot business in the short term.

Profit forecasting and valuation

Since the company's export business showed no signs of improvement, and profitability was dragged down by the robot business, we lowered the 2023 net profit by 191.8% to -16.17 million yuan, and introduced the 2024 net profit forecast of 16.82 million yuan. Maintain a neutral rating. Since we think it will be difficult for the company to return to a normal level of profit in the short term, the P/E valuation method is no longer suitable for company valuation. We switched to the P/B valuation method and gave the company a 1.2x2023 P/B forecast. The corresponding target price was 6.89 yuan, and the corresponding target price was reduced by 6.6%. The target price had room to decline 17.0% from the current stock price.

risks

Risk of fluctuations in market demand; risk of price increases for raw materials.