Small Home Appliance and Construction Business of Xiaosong Shares Shows Resilience

On August 31st, Xiaosong Co., Ltd. (002723.SZ) released its 2022 interim report, which showed that the company's operating income for the first half of the year was CNY 660 million, a slight decrease of 2.89% year-on-year. Its non-GAAP net profit attributable to shareholders was CNY 3.3377 million, a decrease of 13.69% year-on-year. In terms of cash flow, the company's net operating cash flow for the first half of the year was negative CNY 14,300, up by 99.90% year-on-year. The cash flow significantly improved in the second quarter, with net operating cash flow reaching CNY 83.5063 million, up by 199.98% quarter-on-quarter.

In the first half of 2022, the international economic situation was relatively complex, and the COVID-19 pandemic had a certain impact on domestic consumption, putting significant pressure on the household appliance industry's production and sales. According to statistics, the median year-on-year change in revenue and net profit after deducting non-recurring gains and losses of listed companies in the household appliance industry of CITIC was -1.32% and -4.52%, respectively, both showing a downward trend. Faced with systemic pressure in the industry, XJ Group fully leveraged its dual core business advantages in small household appliances and engineering construction. The small household appliance business maintained a stable scale and profitability, while the engineering construction business achieved good growth. Meanwhile, the company strengthened its receivables collection to ensure the stability and flexibility of its ongoing operations and prepared ahead of time for the industry's recovery.

Expansion of the Small Home Appliances Category Matrix.

Strengthening product differentiation advantages.

In the first half of the year, Xiaosong Holdings injected vitality into its small home appliance business, achieving a revenue of 349 million yuan in the small home appliance sector, accounting for 52.88% of the total revenue for the reporting period. With years of industrial accumulation, the company has maintained a keen sense of market demand and trends, focusing on high value-added, high-margin durable goods with high repurchase rates as its new product development direction. Continuously addressing consumer pain points and creating products that lead consumer demand and social trends, the company has gradually uncovered blue ocean opportunities in niche categories with outstanding quality, innovative appearance, practical functionality, and healthy environmental protection.

Currently, the company has developed a series of products, including rechargeable lighting equipment, rechargeable AC/DC fans, environmental appliances, disinfecting appliances, pet appliances, personal care and beauty appliances, educational lighting, and electronic atomizers. The company is committed to creating healthy home and outdoor living environments. It is worth noting that according to the company's semi-annual report, its air purifier products generated revenue of 25.2371 million yuan during the reporting period, representing a growth of 79% year-on-year and demonstrating strong growth momentum.

Currently, the global e-cigarette market is showing strong potential. According to research institutions, the market size of the global e-cigarette industry is expected to surpass $108 billion by 2022, with China's e-cigarette exports reaching approximately RMB 186.7 billion, with a growth rate of about 35%. One company, Xiaoyong Holdings, is increasing its presence in the e-cigarette market by forming a specialized research and development team and partnering with domestic well-known e-cigarette brand companies. The company has already developed multiple e-cigarette products and has submitted an application for a tobacco monopoly production enterprise license in accordance with the "Electronic Cigarette Management Measures". The company's investment in Bode Technology has also received a tobacco monopoly production enterprise license (brand ownership), which includes domestic sales, allowing for legal business activities in the e-cigarette market in China. With the official enforcement of the e-cigarette national standard in October, compliant enterprises are expected to experience a stable and sustainable development trend.

Construction Company wins multiple consecutive bids for engineering projects.

Business efficiency continues to improve.

As an important component of the dual-core business of the company, Guohai Construction, a subsidiary of Xiaozong shares, continues to play a stabilizing role in its construction business. During the reporting period, it achieved a total operating income of 311 million yuan, a year-on-year growth of 16.88%. The business efficiency has further improved, with a year-on-year increase of 1.76 percentage points in gross profit margin. In the trend of steady progress in the domestic construction industry, it maintained good profitability and competitiveness.

In the first half of this year, Xiaosong Co. frequently won bids for new construction projects. According to statistics, the company won a total of seven construction projects with a bid amount of 585 million yuan in the first half of the year. The company is currently maintaining a good pace in obtaining projects. From early July to now, the company has won six new construction projects with a total bid amount of 317 million yuan, laying a good foundation for future performance transformation.

More importantly, Xiao Song Holdings is continuously promoting innovative business in the construction sector. Currently, China Construction is using raised funds to purchase safe and intelligent engineering equipment in an orderly manner, providing better quality services to customers and ensuring smooth and timely project delivery. In addition, the company is making great use of the advantages of safe and intelligent engineering equipment, promoting equipment rental services such as buckle-type scaffolding, achieving business innovation, further improving corporate profitability and market competitiveness, and bringing new growth momentum to the construction business.

In the first half of 2022, XIAOSONG Corporation has maintained strong resilience in its operations. This has been due to the continuous conversion of the company's business foundation into internal driving force along with its continued efforts to enhance its business regeneration ability in unfavorable conditions. These factors have contributed to the company's sustained momentum and strength for its future development. With the recent implementation of supportive policies aimed at stabilizing the economy, promoting consumption, and prioritizing investment projects, coupled with improvements in expectations for exports due to the strengthening of the US dollar, XIAOSONG Corporation's dual mainstay of "small appliances + engineering construction" is expected to have better development opportunities, thereby stimulating the company's innovation and driving power.

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