Incident Overview

1. On December 20, the company announced the “Notice on Investing in the Construction of a Home Appliance Construction Project with an Annual Output of 5 Million Units in the Thai Factory”

Based on future strategic development plans and business development needs, the company plans to use its own funds or self-raised funds to purchase land in Thailand and build a “Thai factory with an annual output of 5 million units of household appliances”. The total investment of the project is 637.9994 million yuan or the equivalent in foreign currency.

2. On December 20, the company announced the “Notice on investing in the construction of a smart kitchen appliance production project with an annual output of 1.2 million units”

Based on future strategic development plans and business development needs, the company plans to purchase land and build a “smart kitchen appliance production project with an annual output of 1.2 million units” in Yuyao, Ningbo, with a total investment of 441.8084 million yuan.

Analytical judgment:

After cleaning, environmental and personal care products, continue to expand kitchen appliances

According to the company's announcement, after the construction of the kitchen appliance project is completed and delivered, a production capacity of 1.2 million household appliances can be formed. According to the company's 2024 semi-annual report, the company's current products cover floor cleaning appliances, environmental household appliances, personal care appliances, etc., and cooperative brand products such as Hoover, Dirt Devil, and Shark. At the same time, the company has a forward-looking layout of dishwasher products. According to the 2024 semi-annual report, the company has begun gradual mass production of dishwashers. ISO9001, ISO14001, and SO45001 system certifications have been completed in the first half of the year, and the products have obtained CQC and EU CE certifications. The American UL certification is under review and is expected to be completed in the second half of the year. According to Sharknijia's October 2024 announcement, Shark Nijia products include kitchen appliances. We believe that developing kitchen appliance production capacity will help the company develop new OEM projects and further enhance ODM service capabilities.

Southeast Asia production capacity continues to expand to enhance global supply chain stability

According to the company's announcement, after the construction of the Thai factory project is completed and delivered, a production capacity of 5 million household appliances can be formed, mainly for the R&D and production of the company's existing home appliances and other new categories of household appliances in the future. According to the 2023 annual report, by the end of 2023, the company has completed the construction of the “Vietnam factory with an annual output of 3.8 million vacuum cleaner products”, which can achieve an annual output design scale of more than 3.8 million units; the “Vietnam factory produces 3 million small household appliances per year” was launched, and construction of the project is scheduled to begin in 2024. We believe that after the implementation of the company's next project in Thailand, it is expected to further enhance its ability to serve overseas customers

Prospects:

According to the customs record sheet of October 9, 2024, the company is deeply involved in the home appliance business and auto parts business. The home appliance business is committed to continuously expanding its business scale, consolidating and continuously expanding the depth of cooperation with existing customers and the development of potential customers through the “expand customers and categories” strategy, deeply lay out the “floor cleaning appliances, environmental household appliances, personal care appliances and kitchen appliances” category, and continuously enrich the product matrix and forward-looking layout a competitive product circuit; the auto parts business is committed to becoming a leading enterprise in the domestic EPS motor industry with international competitiveness, continuously expanding new domestic and foreign projects, rapidly increasing market share and industry position, and thereby improving profitability.

Investment advice

We adjusted our profit forecast. We expect the company's revenue for 24-26 to be 3.9/4.9/6 billion yuan (previous value was 3.6/4.5/5.4 billion yuan), +42%/+25%/+22% year-on-year, respectively, and estimated net profit for 24-26 to be 0.41/0.54/0.67 billion yuan (previous value was 0.4/0.49/0.6 billion yuan), respectively, +27%/+31%/+25% year-on-year, respectively. 1.10/1.44/1.81 yuan (previous value was 1.08/1.32/1.60 yuan). Based on the closing price of 21.73 yuan on December 25, 2024, the corresponding PE was 20/15/12 times, respectively, maintaining the “gain” rating.

Risk Alerts

Downstream demand falls short of expectations, increased industry competition, falling short of expectations, risks such as fluctuations in upstream raw material costs, etc., risks of untimely delivery of goods due to rising shipping rates and port blockages, risks of iterative technology, deviations in industry space measurements, risk of third party data distortion, and the risk that public data used in research reports may be delayed or updated in a timely manner.