Huabao Xinneng released its mid-2023 report. During the reporting period, the company achieved a total operating income of 920 million yuan,-29.9% compared with the same period last year, and a net profit of-50 million yuan,-131.8% compared with the same period last year. Among them, Q2 achieved a total operating income of 470 million yuan in a single quarter,-32.7% of the same period last year, and a net profit of-20 million yuan,-124.6% of the same period last year.

Under the background of interest rate increase and energy crisis normalization, the industry demand is weak in stages, which is a drag on the company's short-term growth performance.

From a regional point of view, the company 2023H1's revenue in North America / Asia (excluding China) / Europe / China is 4.8 million yuan, or 10.0 billion yuan, compared with-31%, 37%, 37% and 20% respectively. Under the background of high inflation overseas, many countries in Europe and the United States, represented by the United States, have taken measures to raise interest rates, which has begun to restrain optional consumption; at the same time, the company's high growth in Europe last year mainly benefited from the outbreak of emergency demand of residents under the energy crisis, and the current energy crisis has begun to enter the digestion stage of early overdraft demand.

Under the influence of the long tail effect of raw material prices and intensified competition, the company's short-term profitability is under pressure. The company's 2023H1 gross profit margin is 39.1%,-7.9 pcts compared with the same period last year. Although raw material prices fell somewhat in the first half of the year, weak demand led to a longer inventory cycle, so it still had to bear the high-cost inventory pressure of last year's Q3-Q4 in the short term. In addition, in order to ensure market share, the company periodically stepped up promotion efforts and reduced the prices of some old products through discounts, which also had a negative impact on gross profit margins. In terms of period expenses, the company's sales / management / R & D / financial expense rates are 37.2%, 11.8%, 8.4%, 8.1% and 8.7 pcts, respectively, compared with the same period last year. Although there are some fluctuations in the short-term demand of the industry, the company is committed to new market development to expand scale, actively participate in brand marketing, increase corresponding management personnel, and constantly increase R & D investment. This led to a decline in short-term profitability, with 2023H1 homing net interest rates of-5.5 per cent.

The brand official website + offline channel construction has made progress and is optimistic that the company will outperform its peers. 2023H1 has added 7 independent websites of global brands in Australia, France, Italy, Spain, the European Union and Hong Kong, China, with a total of 15 sites. In terms of offline channels, 2023H1 accounted for 33% of its offline channel revenue, accounting for + 7.6 pcts compared with the same period last year, and entered more than 6000 global well-known retail stores. We believe that at present, most new entrants to the portable energy storage industry are mainly third-party e-commerce platforms such as Amazon.Com Inc, while independent stations + offline channel barriers are higher, and the company already has a certain first-mover advantage, or is expected to be immune to industry competition to a certain extent, and if the follow-up industry pattern is optimized, the company's profitability is expected to return to a high position.

Investment suggestion: we expect the company to achieve total operating income of RMB 100 million in 2023-2025, respectively,-8% of the same period last year, 33% of the same period last year, 28% of the same period last year, and 0.8% of the net profit of the parent, respectively, and the net profit of the parent is 0.8 billion yuan, respectively, compared with the same period last year. 34% of the current stock price corresponds to the PE valuation in 113-34-25, taking into account the steady development of new markets and offline channels of the company, maintaining the investment rating of "increasing holdings".

Risk tips: demand is lower than expected, raw material prices fluctuate, competition intensifies, restricted shares are lifted, and so on.