Huabao Xinneng disclosed its 2023 semi-annual report and put some pressure on its profits in the first half of the year. 2023H1 achieved revenue of 920 million, year-on-year-30%; homed net profit-50 million, year-on-year-132%; deducted non-homed net profit-80 million, year-on-year-155%. Among them, Q2 achieves revenue of 470 million, month-on-month ratio of + 5%, return-20 million net profit, month-on-month ratio of-28%, non-return net profit of-40 million, month-on-month ratio of-20%. Affected by factors such as the increase in demand for portable energy storage caused by the European energy crisis last year, the company's overseas sales revenue base is relatively large in 2022, superimposed by inflation in Europe, the United States and Japan in the first half of this year, and overall consumption is in the doldrums. the overall demand of the industry this year is significantly lower than that of last year. In addition, under the influence of intensified market competition this year and a sharp increase in expense rates during the company period, revenue and profits declined to a large extent in the first half of the year.

Clearance of high-cost inventory is accelerating, and gross profit margin is expected to maintain stability in the second half of the year. In terms of profitability, the company's comprehensive gross profit margin in the first half of the year was 39.1%, year-on-year-7.9pct; gross profit margin of portable energy storage products was 38.7%, year-on-year-4.3pct; and photovoltaic solar panel gross profit margin was 42.1%, year-on-year + 0.3pct. Q2 comprehensive gross profit margin is 36.6%, month-on-month ratio-5.1pct; net profit rate-4.5%, month-on-month ratio + 2.1pct. The decline in gross profit margin of energy storage products is mainly due to: 1) the market demand was low in the first half of the year, the company's sales fell short of expectations, and most of the sales came from last year's high-cost inventory; 2) the industry competition intensified, and the company sold some old products at reduced prices. We expect that with the gradual clearance of the company's high-cost inventory, the acceleration of product renewal iterations, and the improvement of cost-reduction and efficiency measures, gross profit margin is expected to remain stable in the second half of the year.

The development of offline channels has made phased progress, and the level of net interest rate is expected to be repaired. In the first half of the year, the company increased the development and strengthening of global offline channels, accelerated the rapid laying and entry of offline channels, and has completed the construction of a multi-matrix channel of "independent station of brand official website + third-party e-commerce platform + offline retail". As of 2023H1, the company has entered the channels of more than 6000 retailers such as Walmart, Home Depot, Best Buy, Costco and Bic Camera, accounting for 32.7% of offline retail revenue, year-on-year + 7.6pct. In the future, with the gradual increase in the proportion of the company's offline sales, warehousing costs, after-sales service fees, and environmental protection costs are expected to continue to decline, and the company's net interest rate is expected to be repaired.

Investment in R & D continues to increase, and the moat of product technology continues to expand. 2023H1 invested 77 million in R & D, + 72% of the same period last year. Continuous R & D investment and efficient R & D transformation ensure the continuous upgrading of the company's technology, thus consolidating the company's technological leadership. In the first half of the year, the company launched Solar Generator 2000 Plus, Solar Generator 300 Plus, Solar Generator 3000 Pro and other new optically charged outdoor power products, bringing users around the world the ultimate experience of larger capacity, stronger safety performance and faster light charging speed. In the second half of the year, the company will accelerate the listing of "Geneverse electric shopkeeper" fixed household energy storage products, with the help of the large user base and local operation advantages established in the early stage, to enable the rapid development of new brands, so as to build the company's second growth curve.

Profit forecast: due to the intensification of competition in the portable energy storage industry this year, we adjusted the company's net profit from 2023 to 2025 to achieve a net profit of RMB 380 million, an increase of-58.8%, 220.9% and 103.0%, respectively, compared with the same period last year, and the corresponding PE was 80.3, 25.0, 12.3 times. Maintain the "overweight" rating.

Risk tips: increased competition in the industry; downstream demand is not as expected; new product development is not as expected.