Event: Liren Technology released its 2023 half-yearly report. The company's 2023H1 realized income of 240 million yuan, YoY-27.4%; realized net profit of 20 million yuan, YoY-48.3%; converted, Q2 realized income of 90 million yuan in a single quarter, YoY-39.1%; realized net profit of 1.448 million yuan, YoY-92.1%.

The company is continuing to expand small kitchen appliances, household appliances, kitchen utensils and other categories, increasing the layout of Douyin and other emerging channels, revenue growth is expected to continue to increase.

Q2 overall revenue under pressure, electric cake bell business recovery is obvious: Q2 company's overall revenue decline is mainly dragged down by air fryers, multi-function pans. Affected by the demand for overdraft air fryers in 2022, the prosperity of the domestic air fryer industry is relatively low. According to Ovi data, 2023Q2 domestic online air fryer industry sales YoY-58%. 2023H1 air fryer income YoY-77%. The company continues to increase the product iteration and marketing promotion of the electric cake bell, and the 2023H1 electric cake bell earns YoY+18%. In addition, the company actively promotes the expansion of the product line to small household appliances, listing vacuum wine dispensers, sealing machines, folding electric irons and other new products. 2023H1 small household appliances income YoY+159%.

Q2 company gross profit margin fell year-on-year: Q2 company gross profit margin of 28.6%, year-on-year-4.1pct. Q2's gross profit margin fell, mainly because the company cut prices to optimize unsalable inventory such as air fryers. Looking forward to the follow-up, the company's gross margin is expected to pick up with the launch of new products.

Q2's profitability declined year-on-year: Q2's net interest rate was 1.6%, compared with-10.6 pct. The year-on-year decline of the net profit rate of Q2 company is larger than that of gross profit margin, mainly because: 1) the expenses such as the salary of sales staff are rigid, and the rate of sales expenses increases after the decline of income scale. Q2 sales expense rate compared with the same period last year + 7.0 pct;2) rent property water and electricity fees, consulting fees, etc., Q2 management expense rate compared with the same period last year + 4.1pct.

The net cash flow of Q2 operating activities decreased compared with the same period last year: the net cash flow of Q2 operating activities of the company was-10 million yuan compared with the same period last year, mainly due to the decrease in sales revenue compared with the same period last year. The cash received by Q2 company in selling goods and providing services is-100 million yuan compared with the same period last year.

Investment advice: as the pioneer of the domestic electric cake bell, Liren is the leader of the electric cake bell market segment.

In terms of products, the company has stored more new products in the field of small kitchen appliances and is actively extending to new categories such as household appliances and cooking utensils. In terms of channels, the company is increasing its investment in emerging channels such as Douyin and Kuaishou Technology. Under the pull of new products and new channels, the company's revenue is expected to usher in repair. It is estimated that the EPS of the company from 2023 to 2025 will be 0.53, 0.68 and 0.81 yuan respectively, maintaining the buy-An investment rating and giving a price-to-earnings ratio of 50 times in 2024, equivalent to a 6-month target price of 34.04 yuan.

Risk hint: the risk of rising raw material prices, market competition aggravates the risk.