The brand awareness of electric cake bell is high, and the income driven by air fryer is growing rapidly: Liren Technology has focused on the brand building of electric cake bell products for 27 years, and the brand awareness of electric cake bell ranks among the top three in the category. The company's forward-looking layout of high-prosperity air fryer field, with the help of high-quality foundry to rapidly increase the production capacity of air fryer, the volume of air fryer led to the rapid growth of the company's revenue. In 2018-2021, the company's income CAGR was 10.3%, and the return net profit CAGR was 77.4%.

The growth rate of the kitchen appliance industry has slowed down, and the growth rate of fried kitchen appliances is faster:

From 2016 to 2019, the omni-channel sales of small kitchen appliances in China were CAGR + 7.1%, and in 2019, sales increased by 1.9% compared with the same period last year. According to data from Owei Cloud Network and Magic Mirror, online retail sales of frying machines increased by 43.0% from 2019 to 2021, while sales of Tmall Taobao and JD.com 2022H1 air fryers increased by 179.6% compared with 2020H1. Fried kitchen appliances such as frying machines and air fryers are growing rapidly, mainly because fried products have various functions and can improve consumers' quality of life, and the epidemic situation boosts consumers' demand for such products.

The appearance and function of the company's electric cookies continue to iterate, and compete with other brands for mismatch:

The company attaches importance to product design and launched a series of small kitchen appliances such as Oasis, with a younger and more fashionable appearance than before. The high-end products of Liren electric cake bell can reach more than 1000 yuan, and the function of electric cake bell is constantly extended from simple pancakes, which is different from other brands. The company increases the research and development of air fryers and other new categories, and has mastered the technology of micro-pressure of air fryers. The increase in the proportion of non-production is expected to further enhance the competitiveness of the company's products in the field of air fryers.

The proportion of self-supporting channels has increased steadily, and the company has actively laid out content e-commerce channels. From 2019 to 2021, the proportion of B2C in online channels increased from 34.3% to 43.9%, and the proportion of direct operation increased rapidly. The company is also actively layout Douyin and other content e-commerce channels, increase the intensity of live broadcast in Douyin flagship stores, and carry out product marketing on Douyin through interesting videos and other forms. Liren's gross profit margin of online direct marketing / distribution channels in 2021 is 39.8% and 29.3% respectively. In the future, such as an increase in the proportion of direct channels, it is expected to further increase the company's gross profit margin. 2020 the company began to implement the new dealer rebate policy, the rebate policy is further improved, and the enthusiasm of dealers is expected to increase.

Investment advice:

Liren is a leading enterprise for the subdivision of small household appliances in the kitchen, and the electric cookie bell brand has a long history, while prospectively cutting into the high-growth air fryer track. With the release of new categories such as air fryers, the growth of the company is expected to be further improved. We estimate that the EPS of the company in 2022 to 2024 will be 0.88 pound 1.13 won 1.35 yuan. Combined with the absolute valuation results and with reference to the comparable company valuation, we give the company an PE valuation of 30x in 2023 with a target price of 34.05yuan per share and a Buy-An investment rating.

Risk tips: short-term disturbance of wind epidemic, intensified market competition, lower-than-expected demand for air fryers, fluctuations in the prices of finished products and raw materials, assuming lower-than-expected risks.