Overview: Home care is the cornerstone, the pet business can be expected to grow, profitability is increasing steadily, and the dividend rate is about 7%-8%

Chaoyun Group provides consumers with one-stop home care, personal care and pet categories, covering various categories such as insecticide and mosquito repellent, household cleaning, air care, hand sanitizer, pet food, pet cleaning, pet deodorant, cat litter, etc., mainly involving seven core brands, namely Weiwang, Chaowei, BeiBeijian, Stubborn Tail, Stubborn Mouth, Sealand, and Yunzisu, each targeting different aspects of home care needs and specific consumer groups. Beginning in 2015, in terms of retail sales, the company had the highest market share in the insecticide and mosquito repellent market in China for ten consecutive years, and the second largest market share for household cleaning and air care, and established a leading position in various segments of personal care and pet care. With 2024H1, the company achieved operating income of 1.249 billion yuan, an increase of 10.3% year on year; achieved net profit of 1.79 yuan, an increase of 31.5% year on year; the company's total cash and cash equivalents and time deposits were 2.665 billion yuan, with sufficient cash on hand. The total dividend of the company was RMB 0.0538 per share, with a payout ratio of 40.0%.

Pets: Increase the pet business format, and launch the pet offline physical store service business

The company founded the Stubborn Tail brand in 2019, launched pet care products, and officially vigorously laid out the pet sector; in 2021, it officially launched the high-end pet food brand Stubborn Mouth, completing the dual track layout of pet products and pet food. Since then, the company has continuously strengthened the upstream supply chain and downstream channel distribution capabilities for pet products, food, and health products. It has successively laid out cat litter factories, Shandong Shuaike, Zhongbo Luya, etc. through strategic cooperation, equity investment, etc., and gradually developed from online channels to pet omni-channel collaborative development, investing in claw technology, acquiring Milleyun, and implementing the pet offline physical store service format, successfully creating a closed loop of online and offline profits, and future growth can be expected.

Home care: The basic market is stable, and profitability is improved.

The company's home care products include multiple segments, forming a multi-dimensional brand matrix. On the one hand, we have actively launched product categories with differentiated, strong efficacy, and healthy ingredients, created a variety of high-margin products, upgraded the existing product line, and developed a variety of new products with high profit margins. On the other hand, online and offline channels are making efforts to push high-profit products to the front line, select partners, improve the quality and coverage density of sales points, and actively enhance the profitability of e-commerce business.

Investment advice

The company is China's leading one-stop multi-category home care, personal care and pet category platform. The company is leading the industry in market segments such as mosquito repellent and insecticide, air care, and household cleaning and care, and is actively laying out the pet business, developing a plan to launch a thousand offline offline pet stores, and opening up a second growth curve. We expect the company's revenue for 2024-2026 to be 1.813/2.002/2.194 billion yuan, respectively, up 12%/10%/10% year on year; net profit to mother will be 0.213/0.237/0.262 billion yuan, respectively, up 22%/11%/11% year on year. As of September 23, 2024, the total share capital and EPS corresponding to the closing market value were $0.16/0.18/0.20, respectively, and the corresponding PE was 10.11/9.08/8.21 times, respectively. First coverage, giving a “buy” rating.

Risk warning

Brand risk, industry competition risk, product gross margin decline risk, raw material price fluctuation risk.