Event: On August 29, 2023, Glebe released its semi-annual report for 2023. 2023H1 achieved total revenue of 2,581 million yuan (-18.79% YoY), net profit of 54 million yuan (YoY -121.24%); Q2 achieved total revenue of 1,029 million yuan (-36.24% YoY) in a single quarter, and net profit of 141 million yuan (-233.27% YoY).
2023H1 Downstream retailers are removing inventory to slow the pace of procurement, and the company's revenue is under pressure in the short term. 1) By business product, 2023H1's new energy garden machinery revenue was 1,885 billion yuan (-22.75% year on year), and AC garden machinery achieved revenue of 427 million yuan (-8.70% year on year), due to retail wholesalers slowing down the pace of procurement. 2) By region, 2023H1's export revenue was 2,497 billion yuan (-20.48% year on year), mainly due to the removal of inventory by downstream retailers in North America. Domestic sales revenue was 31 million yuan (+11.02% year on year), achieving double-digit growth, outperforming export sales.
2023Q2 The removal of inventory led to a decline in gross margin, and strategic cost investment lowered the net interest rate. 1) Gross profit margin:
The 2023Q2 gross profit margin was 15.08%, year-on-year -7.73 pct. The main reason was that the company's sales fell short of expectations, and high cost inventory pressure continued, reducing profit margins by increasing product promotion efforts to remove inventory. 2) Net interest rate:
The 2023Q2 net interest rate was -13.74%, a significant year-on-year decline (-20.31pct), due to increased investment on the cost side. 3) Expense side: 2023Q2 sales/management/R&D/financial expense ratios were 23.37/10.35/8.30/ -7.76%, respectively, +12.79/+3.00/+5.16/-2.06pct, year-on-year, respectively. The main reason for the increase in the cost rate during the period was that the company increased sales and R&D investment in order to expand brand influence.
The new energy garden machinery product system is rapidly expanding, and high R&D investment supports product iterative upgrading. 1) R&D side: 2023H1 increased the number of R&D personnel and increased R&D expenses for high-power motor electronic control, vehicle grade battery PACK, energy storage technology, etc., with a total R&D expenditure of 159 million yuan (+48.71% YoY) to provide technical support for the company to accelerate the launch of new products and iterative product upgrades. 2) Production capacity side: 2023H1's factory in the US was officially put into operation. It mainly produces high value-added products, which is conducive to the localization of independent brands, expansion of business scale, and increase the company's market share. 3) Product side: 2023H1 launched lithium-battery commercial garden machinery products with Optimus Z series lawn mowers as the core, enabling the rapid expansion of the new energy garden machinery product system and is expected to become a new growth point in the commercial sector.
Investment suggestions: On the industry side, garden machinery is a commodity that is just needed in Europe and the US. The industry has continued to grow, and domestic demand has also risen; moreover, with European and American emission standards becoming more strict, the garden machinery industry is in a period of revolutionary transformation from fuel power to new energy power, and the development of the new energy garden machinery industry can be expected in the future. On the company side, as a leading global new energy garden machinery enterprise, the company focuses on the field of new energy OPE and is expected to benefit from industry changes. At the same time, it is increasing technology research and development efforts, continuing to launch new products, continuously optimizing supply chain production capacity, and increasing new channel development. It is expected to increase market share and increase revenue performance in the future. We expect the company's net profit to be 276/695/766 million yuan respectively in 2023-2025, corresponding EPS of 0.57/1.43/1.57 yuan, and the corresponding PE at the current stock price to be 34.80/13.84/12.57 times, respectively, maintaining the “recommended” rating.
Risk warning: macroeconomic fluctuations, exchange rate fluctuations, major changes in the business environment of the industry, poor inventory management, development of independent brands falling short of expectations, etc.