Incident: The company released its 2022 annual report and the report for the first quarter of 2023. The company achieved revenue of 2,802 billion yuan in 2022, an increase of 13.82% over the previous year, achieved net profit of 423 million yuan, an increase of 16.60% over the previous year, and achieved net profit of 386 million yuan after deducting non-return mother's net profit of 386 million yuan, an increase of 9.36% over the previous year. Among them, 2022Q4 achieved revenue of 817 million yuan, an increase of 0.19% over the previous year, achieved net profit of 161 million yuan, an increase of 19.10% over the previous year, and achieved net profit of 151 million yuan after deducting non-return mother's net profit of 151 million yuan, an increase of 46.05% over the previous year. Q1 of 2023 achieved revenue of 632 million yuan, an increase of 22.79% over the previous year, achieved net profit of 79 million yuan, an increase of 44.65% over the previous year, and achieved net profit of 72 million yuan after deducting non-return mother's net profit of 72 million yuan, an increase of 40.00% over the previous year

Key points of investment

Q4 Revenue was flat year on year due to the impact of the pandemic, and baby hygiene products performed well. In 2022, the company achieved revenue of 2,802 billion yuan, an increase of 13.82% over the previous year, achieved net profit of 423 million yuan, an increase of 16.60% over the previous year, and achieved net profit of 386 million yuan after deducting non-return mother's net profit of 386 million yuan, an increase of 9.36% over the previous year. Among them, 2022Q4 achieved revenue of 817 million yuan, an increase of 0.19% over the previous year, and achieved net profit of 161 million yuan to the mother, an increase of 19.10% over the previous year. The company's revenue in the fourth quarter was flat year on year, mainly affected by the impact of the epidemic. By product, the company's revenue for baby hygiene products, adult incontinence products, and other products in 2022 was 20.32, 621, and 87 million yuan respectively, up 15.52%, 6.15%, and 44.48% over the previous year. Looking at the subregion, the company achieved domestic revenue of 2,479 million yuan, an increase of 15.93% over the previous year; overseas revenue was 261 million yuan, down 1.84% from the previous year. It was mainly affected by factors such as the impact of the international economic environment and shrinking demand, which affected the company's foreign trade export business. Q1 2023 achieved revenue of 632 million yuan, an increase of 22.79% over the previous year, and net profit of the mother to the mother was 79 million yuan, an increase of 44.65% over the previous year. The launch of the company's new products, such as easy to put on and take off baby pants, and new ultra-breathable materials, is expected to accelerate growth.

Gross margin was under pressure in 2022, cost side control was good, and 2023Q1 gross margin was restored. In terms of profitability, the company's gross margin fell 3.17 pct to 23.15% year on year in 2022, mainly due to the influence of the international crude oil market. Purchasing costs for major raw materials such as polymers, rubber, and cartons increased significantly. Among them, Q4 gross margin increased 5.47 pct to 24.75% year on year. 2023Q1 gross margin increased 0.89pct to 23.06% year over year. In terms of expense ratio, the total cost rate for the company period in 2022 was 7.68%, down 0.67 pct from the previous year. Among them, the sales/management/R&D/finance expense ratio was 3.47%/2.06%/3.62%/-1.47%, and -0.19/0.09/-0.08/-0.48pct over the previous year. Under the combined influence, the company's net profit margin in 2022 was 15.09%, a year-on-year decrease of 0.36pct. The sales/management/R&D/finance expense ratio of the 2023Q1 company was 4.19%/3.21%/3.68%/-2.07%, compared to -0.71/+0.31/-0.15/-0.81pct. Under the combined influence, 2023Q1's net profit margin was 12.56%, an increase of 1.89 pct over the previous year. In terms of cash flow, the company's net cash flow from operating activities in 2022 was 592 million yuan, a year-on-year decrease of 1.81%. Among them, Q4 was 289 million yuan for the single quarter, an increase of 42.23% over the previous year. 2023Q1's net cash flow from operating activities was $0.9 billion, a year-on-year decrease of 84.44%, mainly due to early payment of supplier payments.

Investment advice: Considering that the company is a leading ODM company for personal care products, continues to increase product innovation, omni-channel layout to increase market share, and the company's Thai plant construction and relocation have been completed, the independent overseas brand Sunnybaby is expected to continue to gain strength in 23 years. We forecast the company's revenue for 2023-2024 to be 33.80, 4,06 and 4.652 billion yuan, up 20.6%, 18.5% and 16.1% year-on-year, and net profit of 523, 622 and 730 million yuan respectively, up 23.7%, 18.9% and 17.4% year-on-year, with earnings per share of 3.37, 4.01 and 4.70 yuan respectively, covering the first time, giving “holder-B” suggestions.