Performance summary: in 2022, the company achieved revenue of 1.19 billion yuan (year-on-year-0.01%), net profit of-40 million yuan (year-on-year), and deduction of non-net profit of-50 million yuan (year-on-year). In a single quarter, 2022Q4 achieved revenue of 340 million yuan (year-on-year + 5.4%), net profit of-60 million yuan (year-on-year + 94.9%), and deduction of non-return net profit of-60 million yuan (year-on-year). 2023Q1 achieved revenue of 320 million yuan (year-on-year), net profit of 10 million yuan (+ 466.9%), net profit of 10 million yuan (+ 584.9%), and Q1 performance rebounded.

Affected by the sharp rise in raw materials, 22-year gross profit margin under pressure, Q1 profitability hit bottom and rebounded. During the reporting period, the company's overall gross profit margin was 13.1%, 14.8%, 16.6% and + 4.5pp, respectively, compared with the same period last year. With the gradual decline in the price of polymer and fluff pulp, the gross profit margin showed a steady trend of repair. From a product point of view, the gross profit margin of the company's baby care products / adult care products / pet care products is 12.6% (- 4.7pp) / 12.8% (- 7.0pp) / 3.9% (- 4.3pp) respectively. The gross profit margin of adult care products has dropped a lot, mainly due to consumers' preference for cost-effective adult care products, and the company did not raise the price of the products significantly in the case of a sharp rise in raw materials. From a regional point of view, the gross profit margin of the company at home and abroad is 14.4% (- 7.1pp) / 11.9% (- 3.8pp) respectively. According to the sub-sales model, the company's own brand / ODM achieves a gross profit margin of 14.6% (- 7.9pp) / 10.2% (- 5.1pp) respectively. In terms of expense rate, the company's total expense rate is 11.6%, year-on-year-2.8pp, mainly due to the decrease of financial expenses caused by the increase in interest income and exchange income. The sales expense rate, management expense rate, financial expense rate / R & D expense rate are 8%, 2.6%, 3.3%, 4.3%, and + 0.4pp/-0.6pp/-2.7pp/+0.1pp, respectively. In addition, due to insufficient capacity utilization, the company deducted 61.353 million yuan from the 22Q4 on the production line and supporting equipment. Overall, the company's net interest rate is-3.6%, year-on-year-7ppten 2022Q4 net interest rate is-17.2%, year-on-year-7.9ppten 2023Q1 net interest rate is 3.5%, year-on-year + 2.9pp, profitability is significantly improved.

There has been a steady increase in adult care products, and orders for baby care products are expected to improve. In 2022, the company realized revenue of 540 million yuan (+ 15.6%) / 530 million yuan (- 13.8%) / 100 million yuan (+ 9.8%) respectively, accounting for 45.2% (+ 6.1pp) / 44.5% (- 7.1pp) / 8.1% (+ 0.7pp) respectively. Among them, adult health products maintained steady growth under the pressure of the external environment, and the proportion of income exceeded that of baby care products, becoming the company's main source of income; revenue from baby care products declined, mainly affected by the decline in the domestic birth rate and fluctuations in customer orders.

Independent brand + ODM two-wheel drive, coordinated expansion of various channels. According to the sub-sales model, in 2022, the company's independent brand / ODM/ achieved revenue of 450 million yuan (+ 14.0%) / 720 million yuan (- 7.7%) respectively, and the revenue share was 37.6% (+ 4.6pp) / 60.5% (- 5.0pp), respectively. In terms of independent brands, the company has "coco reliable", "absorbing treasure", "Ann nurse" and other brands, leading the industry in market share, high brand recognition, and maintained a good growth trend in 2022. In 23 years, the company plans to develop offline channels, traditional offline channels such as KA and distribution are steadily put into operation, and independent brands are expected to maintain higher growth than the industry.

As for ODM, due to the decline in the domestic birth rate and the increasingly fierce market competition, the company's domestic infant incontinence product ODM business declined in 2022. During the year, the company expanded a number of domestic mother and child brands and mother-to-child channel customers, strengthened communication with overseas customers, and is expected to contribute to performance increment soon.

Profit forecast and investment advice. It is estimated that the EPS from 2023 to 2025 is 0.36,0.51,0.64 yuan respectively, and the corresponding PE is 32 times, 23 times and 18 times respectively. Maintain a "buy" rating.

Risk hints: the risk of sharp fluctuations in raw material prices, the risk of intensified market competition, the risk that category penetration is less than expected, and the risk that the progress of channel expansion is not as expected.