Event: JS Global Life publishes its 2022 annual report. The company achieved revenue of US$5.04 billion in 2022, YoY -2.3%; achieved results of US$330 million, YoY -21.0%. Converted, 2022H2 achieved revenue of $2.81 billion, YoY -3.8%; achieved results of $230 million, YoY -26.0%. As the level of inflation in the US gradually recedes, demand in the small appliances industry is expected to recover, and it is expected that the company's revenue will recover.

Overall revenue growth came under pressure, and the market share of traditional and emerging categories increased: H2's North American market revenue was -1.7% YoY due to high inflation and retailers' inventory removal. In 2022, the company's traditional and emerging categories achieved an increase in market share in the US market. According to NPD, in 2022, the company's sales share in the US cleaning appliance market was +2.6pct; the sales share in the food cooking appliances market was +2.7pct; and the sales share in the ice cream maker market was +36.8pct. H2's European market revenue YoY +9.4%. The company achieved revenue growth in the European market mainly due to 1) the increase in market share in the UK. According to GfK, the consumption share of the Shark brand in the UK vacuum cleaner market in 2022 was +1.2 pct year over year; the Ninja brand's sales share in the UK food and cooking market was +4.4 pct year over year; 2) Actively expanding markets in other European countries.

H2's gross margin increased year-on-year: 2022H2's gross margin was 36.3%, YOY+1.5pct. H2's gross margin increased year over year, mainly because: 1) the company's vacuum cleaners, air fryers, and air purifiers exported from China to the US were exempted from tariffs; 2) the cost of raw materials declined. According to Wind data, 2022H2, LME 3-month copper prices and LME 3-month aluminum prices YoY -17.2%/-13.3%; 3) International shipping costs declined.

The profitability of H2 has declined: 2022H2, the company's overall net interest rate is 6.0%, YOY-1.8pct. The company's net interest rate declined year-on-year in the second half of the year, mainly because: 1) The company increased its employees in developing new products, expanded its international business, granted bonuses to managers, and increased management expenses. The H2 management expense ratio was +2.5 pct year over year; 2) Marketing expenses increased, and the H2 sales expense ratio was +0.8 pct year over year.

Proposed spin-off of the SharkNinja business and listing in the US: In February 2023, the company announced that it intends to split the subsidiary SharkNinja (excluding the Asia Pacific business) and go public independently in the US. After the spin-off is completed, SharkNinja will be completely divested from the company, and the original shareholders of the company will enjoy shares in the company and SharkNinja at the same time. The spin-off will help the company and SharkNinja's business focus more on different regional markets, and will also help investors better understand the business value of different regions to make investment decisions.

Investment advice: JS Global Life is the world's leading small home appliance company and is in a leading position in the small home appliance markets in China and the US. In overseas markets, SharkNinja continues to expand sales areas, promote omni-channel layout, and expand the category matrix. We expect the company's EPS from 2022 to 2024 to $0.12/0.13/$0.14, respectively, maintaining the buy-A investment rating.

Risk warning: Prices of raw materials have risen sharply, and the competitive pattern of the industry has deteriorated.