Description of the event

The company released its 2024 mid-year report: The company achieved operating income of 0.825 billion yuan, -7.30% year on year, realized net profit of 0.111 billion yuan, +6.12% year on year, realized net profit of 0.101 billion yuan without return to mother, +5.90% year on year, of which 2024Q2 achieved operating income of 0.424 billion yuan, -15.84% year on year, achieved net profit of 0.049 billion yuan, compared with -27.92% year on year, achieved Net profit after deducting non-return to mother was 0.04 billion yuan, -42.36% YoY. Additionally, the company plans to distribute a cash dividend of RMB 3.00 (tax included) for every 10 shares to all shareholders using undistributed profits.

Incident comments

The industry as a whole is under relative pressure, and revenue has declined in stages. 2024H1 achieved revenue of 0.825 billion yuan, or -7.30% YoY, of which Q2 achieved revenue of 0.424 billion yuan, or -15.84% YoY. By product, massage chairs and small massage appliances each accounted for 96.64%/3.04% of the main business revenue, while other businesses accounted for a relatively low share; by region, the company's domestic/export sales accounted for 44.49%/55.51% respectively. The share of export sales increased slightly compared to the same period last year, which is relatively stable over a longer period of time. The overall industry was under relative pressure during the reporting period. In terms of domestic sales, offline consumers paid more attention to cost performance, and the share of products in the mid-range price range increased significantly; platform price competition intensified while the growth rate of the online industry slowed; in export sales, the number of orders from the company's main customers declined, and performance varied from region to region. Among them, the Korean market experienced a marked decline in Q1 and a recovery in Q2; the US market performed well in Q1. Q2 was greatly affected by factors such as rising freight rates and falling demand for terminals; the European and Middle East markets are growing steadily, and the Russian market is growing significantly but is subject to external shipping progress or falling demand. factors Constraints; the Southeast Asian market is generally stable. Domestic companies continue to further optimize the channel layout, enhance the high-end user base through active marketing offline, use new media such as Douyin and Xiaohongshu to empower offline channels to help grow sales; allocate resources online for different product lines to create popular models in core price segments, increase transaction conversion rates, and further improve market share and team operation capabilities; actively explore new customers and seek high-quality orders in foreign companies to support the company's performance.

Q2 Revenue and gross margin declined due to the external environment. Combined with a high base, performance was poor year over year. 2024H1 achieved net profit of 0.111 billion yuan to mother, +6.12% year over year, with Q1 contributing more. The gross margin of the 2024H1 company reached 33.17%, +1.82pct. Looking at the subregions, the gross margin of the company's domestic and foreign sales reached 38.45%/28.43%, respectively. Sales, management, R&D, and finance rates were -0.98/+0.95/+0.43/+0.44pct year-on-year, respectively. The Q2 company achieved net profit of 0.049 billion yuan, or -27.92% year-on-year. On the one hand, the company's revenue was pressured by overall industry demand; on the other hand, Q2 gross margin was -2.32pct year over year, or mainly affected by changes in the company's customer structure and increased competition in the industry. The rate-side performance in Q2 is in line with the overall year-on-year trend of H1.

Investment advice: As a leader in the domestic massage chair market and an important manufacturer of massage chairs in the world, the company has an advantageous position in the industry. The company has accumulated a complete massage chair R&D, industrial design and quality control system. The domestic market already has a good brand recognition foundation, and the foundation of cooperation with major overseas customers is stable and is expected to drive new customer growth. As a result, as the demand side gradually recovers and stabilizes, the company is expected to usher in relatively rapid recovery growth. The company's net profit for 2024-2026 is estimated to be $207, 2.36, and 273 million yuan, respectively, corresponding to PE of 10.4, 9.2, and 7.9 times, maintaining a “buy” rating.

Risk warning

1. Demand recovery is slow due to fluctuations in the economic situation;

2. Revenue adjustments due to fluctuations in orders from major customers.