Event: Liren Technology released its third-quarter report in 2023. In the first three quarters of 2023, the company realized income of 320 million yuan, YoY-31.8%; realized net profit of 20 million yuan, YoY-59.5%; converted, Q3 realized income of 70 million yuan, YoY-43.4% in single quarter, and realized net profit of-2.052 million yuan, YoY-141.3%. The company is continuing to expand small kitchen appliances, household appliances, kitchen utensils and other categories, to increase the layout of Douyin and other emerging channels, revenue growth is expected to usher in a rebound.

Q3 revenue is under pressure: the decline in overall revenue of Q3 company compared with the same period last year is mainly dragged down by air fryers and multi-function pans. Due to the influence of the demand for overdraft air fryers and other factors, the prosperity of the domestic air fryer industry is relatively low.

According to Oviyun data, Q3 domestic air fryer online retail volume YoY-49%. According to Jiuqian data, 2023Q3's online sales YoY-31%. In terms of categories, the online sales of 2023Q3 electric cookers / air fryers / multi-function pans are YoY-6%/-84%/-71% respectively.

Q3's profitability declined year-on-year: Q3's net interest rate was-2.8%, year-on-year-6.7 pct. Q3 company's net interest rate turned negative, mainly because: 1) the company cut prices to deal with unsalable inventory such as air fryers.

Q3 company gross profit margin is 22.5%, year-on-year-6.2 pct;2) staff compensation, rent, property, utilities and other management expenses are relatively rigid, after the decline in income scale, Q3 management expenses rate is + 4.4 pct year-on-year.

The net cash flow of Q3 business activities increased compared with the same period last year: the net cash flow of Q3 business activities was + 20 million yuan compared with the same period last year, mainly because the company was cleaning up the inventory of products and reducing the purchase amount of raw materials. The cash paid by Q3 company for purchasing goods and receiving labor services is-40 million yuan compared with the same period last year.

Investment advice: as the pioneer of the domestic electric cake bell, Liren is the leader of the electric cake bell market segment.

In terms of products, the company has stored more new products in the field of small kitchen appliances and is actively extending to new categories such as household appliances and cooking utensils. In terms of channels, the company is increasing its investment in emerging channels such as Douyin and Kuaishou Technology. Under the pull of new products and new channels, the company's revenue is expected to usher in repair. It is estimated that the company's EPS from 2023 to 2025 will be 0.22max 0.37max 0.47 yuan respectively, maintaining the buy-An investment rating and giving it a price-to-earnings ratio of 90 times in 2024, equivalent to a 12-month target price of 33.37 yuan.

Risk hint: the risk of rising raw material prices, market competition aggravates the risk.