Core views

The company released a semi-annual report for 2023. Q2 revenue increased steadily, net profit from homologation achieved double-digit growth, mainly due to the stability of integrated stoves, rapid growth in cabinets and other kitchen appliances, steady increase in revenue contribution, and a steady increase in revenue contribution. The layout of emerging channels is beginning to show results. At the same time, raw material cost dividends and cost reduction and efficiency are driving the increase in gross margin. Looking ahead to the second half of the year, the company is expected to launch new products such as integrated cooking centers, create a second growth curve, meet future consumption trends, and maintain stable gross profit margins and net interest rates.

occurrences

On August 28, 2023, Shuaifeng Electric released the 2023 semi-annual report.

In 2023H1, the company achieved operating income of 454 million yuan (YOY -0.95%), net profit of 114 million yuan (YOY +9.72%), and a net interest rate of 25.05% (YOY+2.44pct).

Among them, Q2 achieved operating income of 279 million yuan (YOY +4.47%), net profit of 74 million yuan (YOY +11.65%), and net interest rate of 26.41% (YOY+1.70 pct).

Brief review

1. Revenue analysis: The contribution of new categories is increasing, and the new channel layout is beginning to show results I. Sub-products: Integrated stoves are stable, and the layout of integrated cooking centers

1) Integrated approach: Achieved revenue of 403 million yuan (YOY -5.37%), accounting for 88.65%.

According to the company's announcement, during the 618 campaign, the transaction value of the company's TJ3-8B synchronous integrated cooking stove exceeded 100 million yuan. This product won the top single product sales volume in the simultaneous steaming and roasting category on the Tmall and JD platforms respectively. According to data from Aowei Cloud Network, online retail sales and retail sales volume of Shuaifeng Integrated Stove Q2 were -22.9% and -24.2%, respectively. We expect offline dealer stores to recover month-on-month, and emerging channels such as home improvement, KA, sinking, and engineering to grow.

2) Wooden cabinets: Achieved revenue of 18 million yuan (YOY +133.66%), accounting for 4.01%.

The company supplies cabinet products, and at the same time gradually promotes the customized layout of the whole kitchen and the whole house to provide consumers with a one-stop integrated smart kitchen solution.

3) Other kitchen products: Achieved revenue of 28 million yuan (YOY +91.14%), accounting for 6.13%. The company has successively launched a series of products such as sinks, dishwashers, integrated sinks, built-in kitchen appliances, and gas water heaters. Since then, it has continuously increased the package rate and customer unit price, driving the growth in the scale of kitchen appliance revenue. Based on consumption trends, the company lays out categories such as integrated cooking centers and integrated stove washing centers, etc., and actively creates a second growth curve.

4) Other businesses: Achieved revenue of 06 billion yuan (YOY -48.48%), accounting for 1.22%.

II. Sub-channel (audit caliber): Distribution+e-commerce forms the basic market, and the expansion of emerging channels is accelerating 1) Distributors: Achieved revenue of 421 million yuan (YOY -0.35%), accounting for 92.62%. 2023H1 has added and optimized more than 100 dealers, and added and renovated about 150 Shuai Feng's fifth-generation image store specialty stores to improve store quality. As of the first half of the year, the company had nearly 1,300 dealers and about 2,200 sales terminals, and the company tried to collaborate with dealers to expand distribution stores. The company actively promotes the “Benchmark Club Resource Allocation Program”, creates benchmark dealers, and cultivates comprehensive service capabilities for high-quality potential dealers. Over the next few years, it will continue to promote the development goals of building terminals with retail sales of 100 million in provincial capitals, 50 million dealers in prefecture-level cities, and 10 million dealers in county-level cities. In addition, the company is actively expanding emerging channels, reaching strategic cooperation agreements with KAs such as Red Star Macalline and Easyhome, opening up specific models to help offline dealers cooperate with local home improvement channels, and adding cost-effective products to promote the expansion of sinking channels.

2) E-commerce: Achieved revenue of 119 million yuan (YOY -9.95%), accounting for 4.12%. The company has developed an online multi-platform exclusive model, and at the same time “cultivates grass” by conducting long-term multi-content live broadcasts through platforms such as Diantao, JD, Douyin, and WeChat, thus promoting sales transformation.

3) Offline direct management: Achieved revenue of 113 million yuan (YOY -6.43%), accounting for 2.89%.

4) Overseas; realized revenue of 101 million yuan (YOY -7.02%), accounting for 0.23%.

2. Profit analysis: Benefiting from cost dividends, Q2: Profit level increased 1) Margin side: Gross margin increased steadily, benefiting from cost dividends and cost reduction and efficiency 2023H1 gross margin was 47.91% (YOY+2.49pct), of which Q2 gross margin was 48.04% (YoY+1.84pCT), mainly due to the cost dividend brought about by falling raw material prices in the first half of the year. At the same time, the company reduced costs and increased efficiency through the use of automated production lines. Looking ahead to the second half of the year, raw material price spreads may gradually narrow, and the impact of cost dividends may decrease, but product structure optimization is expected to maintain stable gross margin.

2) Expense side: Expense control is better, and the cost rate has decreased

The cost rate during the 2023H1 period decreased by 1.30 pct year on year, and the sales/management/R&D/finance expense ratio was +3.20/-1.91/-2.55/-0.04 pct, respectively; of these, the cost rate for the Q2 period fell 0.82 pct year on year, and the sales/management/R&D/finance expense ratio was +2.99/-2.31/-1.30/-0.20 pct, respectively. The main departments are: 1) increased investment in marketing activities and advertising; 2) reduced share payment costs; 3) increased R&D difficulty and longer investment cycles, which led to a decrease in R&D expenses compared to the same period.

3) Net profit side: Q2 Net interest rate increased steadily

The 2023H1 net interest rate was 25.05% (YOY+2.44pct), of which the Q2 net interest rate was 26.41% (YOY+1.70pct). Looking ahead to the second half of the year, gross margin will remain at a high level, cost ratio will continue to be controlled in Q2, and net interest rate is expected to continue to rise.

Investment suggestions: The company's high-end integrated stoves have outstanding product capabilities, and the second-generation succession optimizes the management organizational structure and diversified channel layout. Currently, the second category and product matrix are constantly being improved and expanded. Based on consumption trends, the layout of integrated cooking center products is expected to contribute more and more. We predict that in 2023-2025, the company will achieve net profit of 245/2.70/299 million yuan, corresponding EPS of 1.33/1.47/1.62 yuan, and the current stock price corresponding to PE 13.05/11.85/10.71 times, maintaining the “buy” rating.

Risk analysis

1) Increased competition in the industry: Traditional kitchen and bathroom brands such as Boss, Fangtai, and Vantage have successively entered the integrated stove industry and stepped up efforts to lay out offline channels and products. There is already a trend of price competition in segmented products. As brands continue to sink in the market and high-end products, price competition may further intensify.

2) Recovery in raw material prices: Raw materials are the main component and cost source of integrated stove products. Raw material prices affect the profit level and performance of the integrated stove sector. Currently, raw material prices are low, but it is difficult to raise the average gross margin level of the industry. With the reversal of raw material prices, the profit level of the integrated stove industry may decline further.

3) Fluctuations in the real estate industry: Sales of integrated stoves are mainly concentrated in third- and fourth-tier cities, offline distribution channels, and mainly from new home renovations. Currently, the growth rate of residential sales is in a downward range, and sales of integrated stoves may continue to be under pressure.