Core views
23H1's revenue has been growing steadily, and its performance has been outstanding. 23H1's revenue was 2.77 US dollars (yoy +24.0%). From the three perspectives of channels, regions, and products, the company's revenue increased year-on-year, mainly due to the company's strong promotion in the market and brand. At the profit level, gross profit performance was impressive. The company's gross margin was 45.2% (39.2% in the same period last year), and net profit at the parent level was 33 million US dollars (yoy +110.7%).
We believe that as the company's strategy progresses steadily and overseas demand for H2 remains strong, the company's profitability is expected to continue to be maintained.
Brief review
Revenue is growing steadily, and profit performance is impressive
(1) Revenue: The company's revenue is growing steadily. 23H1's revenue is 2.77 US dollars (yoy +24.0%). By channel, revenue mainly comes from Amazon e-commerce channels, Amazon channel revenue is 220 million US dollars, and non-Amazon channels are 57 million US dollars; by market, revenue mainly comes from the North American market, of which revenue is 199 million US dollars, Europe is 65 million US dollars, and Asia is 0.13 billion US dollars; by product, Levoit still contributes major revenue. Among them, Levoit's revenue is 146 million US dollars. Cosori's revenue was $0.95 billion, and Etikcity was $0.36 billion. From the three perspectives of channels, regions, and products, the company's revenue all achieved year-on-year increases.
(2) Profits: Profits recovered at an accelerated pace. 23H1's gross margin was 45.2% (39.2% for the same period last year), net profit for the parent company was US$33 million (yoy +110.7%), and the company's net profit margin was 11.8% (6.9% for the same period last year). As costs such as shipping have declined, the 2022 recall has come to an end, and the company's profits have been released quickly. We are optimistic about the company's net profit cashing out for the whole year.
Regional and product expansion is steady, and we are optimistic that 23H2 overseas demand is still steady (1) The company's products and market are expanding smoothly. The company's market expansion was actively promoted in the first half of the year. Among them, North America/Europe/Asia revenue was +15.7%/+52.2%/+49.5%, respectively. In addition, the company also entered supermarkets in Northern Europe, Spain, Germany and other places. Currently, Europe's revenue share has reached 23.6%, which is in a stage of rapid growth. On the brand side, the company recall has come to an end. All H1 brands have achieved high growth. Among them, Etek city resumed growth (+38.7% year on year, mainly driven by body scale products), Cosori +25.7% (mainly driven by the European market), and Levoit +19.8% (mainly driven by products such as air purifiers).
(2) Optimistic that demand in H2 overseas markets is still stable. Amazon Q2's 3P revenue is nearly 20%, reflecting a year-on-year recovery in e-commerce demand in Europe and the US as a whole. We believe that demand in the cross-border e-commerce industry may remain resilient in the second half of the year: 1) In the second half of the year, big promotions such as Christmas, Black Friday, Internet 1, and Prime Day may drive an increase in demand; 2) This year, wildfires in Canada, the US, etc. are serious or increase the demand for air purifiers by companies; 3) The cost of shipping, advertising, etc. has basically not fluctuated greatly, and many big sellers have not experienced inventory pressure. H2's revenue performance may not improve month-on-month.
Profit forecast: We expect the company's revenue for 23 and 24 to be 611 million US dollars and 740 million US dollars, respectively, up 24.5% and 21.2% year on year, respectively; net profit for returning to the company is 0.72 and 188 million US dollars. We gave the company 13 times PE in 23, corresponding target price of 6.3 HKD, maintaining the “buy” rating.
Risk warning: The pressure on the European and US economies has led to insufficient consumer retail demand; Amazon channel commissions, freight rates, and advertising costs are at high risk; Amazon channel dependency is more risky; there is a high risk that the company's shipments will decline due to insufficient demand from the Amazon channel; risk of global shipping prices rising; risk of a decline in global shipping prices; risk of increased competition in the European and American kitchen appliances sector; risk of increased competition in the European and American kitchen appliances sector; risk of additional tariff costs due to changes in trade relations between China and the US; the risk of additional tariff costs due to changes in trade relations between China and the US; the risk of companies expanding channels other than Amazon falls short of expectations Risk; Company expansion in other countries falls short of anticipated risk.