An outstanding representative of small household appliances under the wave of Chinese household appliances going overseas. Against the backdrop of the maturity of small household appliances in Europe and the US, the company showed scarce high growth. The revenue scale soared from US$85 million in 2017 to US$490 million in 2022, and the CAGR of 5 reached 42%. Behind the high growth, the general environment is the continuous increase in the scale of cross-border e-commerce in China and the deepening of online channels in Europe and the US under the pandemic. What is the company doing the right thing from its own perspective? Starting from products and channels, this article explains the company's alpha:
Product side: Rich categories, clear brand matrix, focusing on Levoit environmental appliances and Cosori kitchen appliance brands. Relying on China's strong supply chain, focusing on design and production outsourcing, the cost-effective positioning is in line with the trend of declining consumption in Europe and the US. Air purifiers, humidifiers, and air fryers have been successfully built and replicated to a new category of tower fans. 23H1 has led to a high increase in revenue. In the future, the company will also launch new categories such as pet products and wearable products.
Channel side: Deeply involved in America and Asia, and use America and Asia's operating experience to cooperate with Amazon to enter the European, Canadian, Japanese and Middle Eastern markets. Among them, the European market expansion has achieved remarkable results, and 23H1's revenue share has reached 23%. In addition, offline retail is still the mainstream sales channel in Europe and the US, and brand awareness accumulated through online sales has also helped the company explore the offline market.
Investment advice: The company's future growth depends on the continuous implementation of new categories and channels. The company's revenue is expected to be US$613/7.35/877 million in the year 23-25, with a year-on-year difference of +24.95%/+19.95%/+19.38%, respectively. In terms of gross margin, it is expected to be 45.50%/45.30%/45.10% in 23-25, respectively. The corresponding net profit for the 23-25 years was 0.63/0.76/086 million US dollars, with a year-on-year difference of +485.46%/+21.43%/+12.49%, respectively. The corresponding EPS was 0.05/0.07/0.07 US dollars. Calculated at the closing price of HK$4.92 on November 21, 23 (0.64 US dollars), the corresponding PE was 11.86/9.76/8.68 times. Comparable to the company's average PE in 23 years, covering 18 times for the first time, giving it an “increase in holdings” rating.
Risk warning: Amazon platform policy changes; fierce market competition; new product development falling short of expectations; changes in Sino-US relations and related trade protection policies, etc.