Performance review

2Q23 performance is lower than we expected.

The company announced 1H23 results: 1H23 operating income 476 million yuan, year-on-year-29.9%; return to the mother net profit 66 million yuan, year-on-year-21.2%; deduction of non-return net profit 60 million yuan, year-on-year-23.2%.

Corresponding to 2Q23 operating income of 233 million yuan, year-on-year-34.4%; net profit of 47 million yuan, + 1.6%; and deduction of non-return net profit of 43 million yuan, + 1.8% of the same period last year. The company's 2Q23 performance is lower than we expected, mainly due to sluggish demand in overseas markets, and the customer destocking cycle is not over yet.

The company's inventory cycle is later than that of the industry, and 1H23 revenue is obviously under pressure: 1) compared with other clean appliance export enterprises, the company's inventory cycle begins later, and revenue in 2022 only declined slightly by 2% compared with the same period last year.

Since 1Q23, the company has just begun to feel the pressure of customer destocking, and 1Q23/2Q23 revenue is-25% Mather 34% compared with the same period last year. 2) according to the General Administration of Customs, the export value of 1H23 vacuum cleaners / air compressors in China (USD caliber) is-4% less than that of the same period last year, while the revenue of dry and wet vacuum cleaners / small air compressors in the same period is-6% and 45% compared with the same period last year. We estimate that the destocking of vacuum cleaners for overseas customers is coming to an end, and it will take time for air compressors to be de-stocked.

We estimate that 1H23 industrial fan revenue still achieved good growth compared with the same period last year, and new categories continue to expand.

Exchange earnings offset part of the drag on performance caused by the expense rate during the period: 1) 1H23's gross profit margin reached 31.9%, year-on-year + 6.7ppt, mainly due to the decline in the price of raw materials and the increase in the proportion of middle and high-end products. 2) this year, the company increased the marketing investment of authorized brands and independent brands, expanded the R & D team, while revenue declined, resulting in a large increase in the expense rate during the company period compared with the same period last year, which is a drag on performance. 1H23 sales / management / R & D expense rate year-on-year + 4.8/+4.2/+3.2ppt. 3) under the influence of exchange rate fluctuations, the exchange income of 1H23 Company is 39.44 million yuan, which has a certain positive contribution to the performance. Under the combined influence, the net interest rate of 1H23 is + 1.5ppt to 13.9% compared with the same period last year.

Trend of development

Looking forward to the inflection point of the company's main business and paying attention to the progress of nursing robots: 1) the company has accumulated excellent R & D capabilities, solid channel barriers and high-quality customer resources, and we are optimistic about the company's ability to obtain new brand licenses and develop new categories. With the gradual end of the inventory cycle for overseas customers, we believe that the company's main business is expected to usher in a revenue inflection point in the second half of 2023. 2) since 2013, the company has developed nursing robots and laid out the elderly nursing racetrack. At present, the nursing robot products have been iterated to the fifth generation, and have been certified in China, the United States and Japan, and have shipped in small quantities to some nursing homes and pension institutions. In the context of the growing demand for care for the elderly, we are optimistic about the long-term development of the company's nursing robots.

Profit forecast and valuation

As the pace of destocking of the company's overseas customers is not as fast as we expected, the net profit of 2023 Universe will be reduced by 14% to 139 million yuan / 169 million yuan in 2024. The current share price corresponds to a price-to-earnings ratio of 20.6 times 2024 / 17.0 times 2024. Due to the recent improvement in the valuation center of the export industry chain, we maintain an outperform industry rating and a list price of 20.6 yuan, corresponding to a price-to-earnings ratio of 27.0 times 2024 / 22.3 times earnings in 2023, which is 31% higher than the current stock price.

Risk

The risk of recovery of overseas demand is less than expected; the risk of exchange rate fluctuation; the risk of fluctuation of raw material price.