Huabao Xinneng released its three-quarter report for 2023. During the reporting period, the company achieved revenue of 1.58 billion yuan,-29.2% year-on-year, and net profit of-60 million yuan,-124.3% compared with the same period last year. Of this total, Q3 achieved revenue of 660 million yuan in the single quarter,-28.0% of the same period last year, and net profit of-10 million yuan,-111.6% of the same period last year.

The short-term demand for portable energy storage is weak, and the company's revenue end is under pressure. Interest rates continued to rise in Europe and the United States in 2023, and high inflation significantly curbed consumption. From January to September 2023, electronics and home appliance sales in the United States were-3% compared with the same period last year, while retail sales in the euro zone in August 2023 were-2.1% year on year and-1.2% month-on-month. At the same time, due to the impact of the European energy crisis and the conflict between Russia and Ukraine in the same period in 2022, the strong demand for portable energy storage products led to a high base. Since 2023, with the decline in natural gas prices, demand has returned to normal after the normalization of the energy crisis. The inventory of superimposed European energy storage products has climbed to an all-time high, and industry competition has intensified. Under the superimposed influence of the above factors, the company's Q3 single-quarter revenue was 660 million yuan,-28.0% compared with the same period last year, but the decline was slightly narrower than that of Q2. From a sub-market point of view, we expect that it will take time for the inventory to be eliminated in Europe, and the inventory in the United States and Japan has been reduced to the normal level, in which the company's "Jackery electric waiter" ranked first in the Best Seller of outdoor power supply in the United States during Amazon.Com Inc's Primeday period, with a year-on-year increase of about 20%.

The gross margin is + 4.8 pcts month-on-month, and profitability has improved compared with the second quarter. The company's Q3 single-quarter gross profit margin is 41.4%, year-on-year-2.6 pcts, month-on-month + 4.8pcts, mainly due to the gradual clearance of high-cost inventory, the superimposed decline in raw material prices and the optimization of product structure brought about by the launch of new products. In terms of period expense rate, Q3 sales expense rate is 34.4%, month-on-month ratio is-3.7%, of which brand marketing cost is down 15.8%; management expense rate is 7.5%, month-on-month ratio is-4.7 pcts. With the subsequent digital construction and cost reduction and efficiency measures, there is still room for optimization; R & D expense rate is 5.8%, month-on-month ratio-1.8 pcts. Thanks to improved gross profit margin and good cost-side control, the company's Q3 net profit margin is-1.7%, with a month-on-month ratio of + 2.8 pcts.

The chairman proposed to buy back the shares of the company, demonstrating long-term confidence and value recognition. On October 26, the company received a letter from the chairman of the board of directors on the proposal to use super-raised funds to buy back the company's shares, intending to use IPO super-raised funds of not less than 50 million and not more than 100 million yuan to buy back the company's shares at a price not higher than 150% of the average stock trading price in the 30 trading days before the board of directors passed the repurchase resolution. The repurchased shares will be used for employee stock ownership plans or equity incentives. We believe that the buyback program reflects the founder's confidence and value recognition of the company's future development, which is conducive to enhancing investor confidence and improving the company's long-term incentive mechanism.

Investment suggestion: considering that the industry demand recovers slowly under the influence of the high base, and under the background of the intensification of the pattern, the company has more upfront expenses, so the profit forecast is lowered, and the company is expected to achieve total operating income of 100 million yuan in 2023-2025, respectively. Year-on-year-26% compared with the same period last year-26%, 35%, 27%, respectively. The net profit of return to the mother is-0.7 Universe, which is RMB 1.15 billion, respectively, which is-125% compared with the same period last year. The current stock price is 25 times corresponding to the valuation of PE in 2024-2025, and maintains the "overweight" rating.

Risk tips: demand is lower than expected, raw material prices fluctuate, industry competition intensifies, and so on.