On July 9, 2024, the company disclosed its 24-year semi-annual performance forecast. During the period, it is expected to achieve total operating income of 1 billion yuan, -35% year over year; net profit to mother of 1.1 to 0.13 billion yuan, or -74% to -69% year over year. Among them, 24Q2 is expected to achieve total revenue of 0.51 billion yuan, or -12% year-on-year; net profit to mother is estimated to be 0.37-0.057 billion yuan, or -70% to -53% year-on-year.

The company's 24Q2 revenue decline improved markedly. Judging from the product structure: considering the iteration period of new and old products, the revenue contribution was limited, and the share of internal participation in Q2 improved month-on-month under normal delivery & sales. Recently, the 39-degree Jiachen version of Naisan has also been newly listed and anchored to build the North China market; however, due to the increase in the relative share of domestic products and the relative share of Xiangquan and domestic products, the gross margin level during the period was still under pressure. The marketing transformation with preemptive costs continues to advance, and the sales expense ratio level is also expected to increase during the period. Overall, profit side performance is still under pressure (estimated net interest rate of about 7.2% to 11.2% for 24Q2, which is still declining from month to month).

Currently, the company's focus is still on building a market within Shenzhen and building a model market. The inventory level in the province is relatively superior to that of outside the province. Recently, the company held a model market launch conference in Yiyang, which is also the first model city in the province. It has previously started construction work for 10 major model markets such as Handan and Shijiazhuang outside the province. The company continues to promote the transformation of the marketing model and continues to pay attention to the transformation results under BC's collaboration.

Considering the continued elimination of channel inventory, we lowered 24-26 net profit by 33%/30%, and expected 24-26 revenue to -6.3%/+15.3%/+14.1%; net profit to mother was -27.3%/+24.1%/+20.5%, corresponding net profit to mother 0.4/0.49/0.6 billion yuan, respectively; EPS was 1.23/1.52/1.83 yuan. The current PE valuation of the company's stock corresponds to 31.8/25.6/21.3 times, respectively, to maintain “purchase” ratings.

Risk of macroeconomic pressure; marketing transformation results falling short of expectations; nationalization falling short of expectations; food safety risks.