Lawn symbolizes wealth and status, and the market demand for new energy garden machinery mainly comes from Europe and the United States. Dating back to the feudal society, there was a large lawn around the aristocratic castle, so the culture of the lawn symbolizing the aristocratic temperament was engraved in the thoughts of Westerners. The global market for OPE (outdoor power tools, mostly for lawn garden maintenance) is $25 billion in 2020 (of which North America and Europe account for more than 80 per cent), and is expected to reach $32.4 billion in 2025, with a GAGR of 5.3 per cent.

The purchasing mode of European and American users determines that brand channel is the core competitive factor. In developed countries, there is a phenomenon of counter-urbanization (transfer from the city to the suburbs), the suburban residential space is large, the distance between houses is far away, so the lawn area is also expanded accordingly. In Europe and the United States, the labor cost is high, usually the residents take care of the lawn themselves, resulting in most of the sales model of lawn mower is to C. The largest proportion of the income of garden machinery products in the European and American market is obtained by the Shang Chao channel, the popularity of the product brand lies in the penetration of the channel, and the Shang Chao channel entering the European and American market is the key factor.

Short-term gross profit margin is affected, increase the layout of sales channels and new products on the market, waiting for growth. Shipping affected by the epidemic last year, North America missed the peak sales season, resulting in the phase of destocking so far this year, and short-term performance was affected. The gross profit margin was 25.3%, down 2.23pct from last year.

The company implements the sales model of omni-channel (Shang Chao + e-commerce + dealer) coverage, stable cooperation with many well-known merchants in Europe and the United States, and continues to increase sales investment. H1 sales expenses in 23 years are 398 million yuan, an increase of 40.93% over the same period last year. The full range of 82V commercial products and six intelligent lawn mowing robots integrated with RTK and vision technology are expected to be put on the market in October 2023, consolidating the company's low advantages.

Investment suggestion: we estimate that the operating income from 2023 to 2025 will be 48.4% to 75.2 / 9.33 billion yuan, with a year-on-year growth rate of-7% / 42% / 24%. The net profit of returning to the mother was 830 million yuan respectively, an increase of-86%, 6405% / 92.6%. Give 2025 20 times valuation, corresponding to the market value of 16.6 billion, corresponding to the stock price of 34 yuan, the first coverage, given a "buy" rating.

Risk hint: demand weak risk; channel layout is not as expected; sea freight rising risk.