The company released a performance forecast for the first half of 2024:2024H1 revenue is about 0.817 billion yuan (about +30% year on year), and a single Q2 is about 0.433 billion yuan (about +25.7% year on year). Net profit from 2024H1 was 0.091-0.098 billion yuan (+102.4%-118.0%), a single Q2 was 0.049-0.056 billion yuan (+3.2%-18.0% year over year), and the median value was 0.052 billion yuan (+10.6% year over year, excluding the doubling of the impact of exchange). 2024H1 achieved 0.078-0.085 billion yuan after deducting non-net profit (+80.0%-96.2%), a single Q2 was 0.042-0.049 billion yuan (-11.6% ~ +3.0%), and the median value was 0.046 billion yuan (-4.3% year over year, excluding exchange rate growth nearly doubling). The company's 2024H1 revenue and profit performance was impressive, mainly due to overseas inventory digestion, steady recovery of customer orders, good growth for some customers, and increased revenue from new customers.

Old customers are deeply bound, and new customers are growing steadily. According to data from the General Administration of Customs, the export value of pet urinal pads 2024Q1/2024Q2 (April-May) was 0.78/0.6 billion yuan, respectively, +17.2%/+16.0% year-on-year, respectively, continuing the improvement trend. The company is deeply tied to high-quality global customers such as Amazon, PetSmart, and Walmart. In 2023, the CR5 of the company's customers was 48.7%, the customer was highly sticky, and the supply share was rising steadily. At the same time, the company has actively participated in large-scale exhibitions at home and abroad in recent years, vigorously expanded and explored potential customers, and continued to contribute to growth.

Ongoing orders continue to grow, and profitability is optimized. Benefiting from the continuous increase in orders, the 2024H1 company's production capacity utilization rate increased dramatically (as of early June 2024, the company's core product, pet diaper production capacity utilization rate reached about 90%), the price of superimposed raw materials was stable, internal cost reduction and efficiency continued to advance, and the company's profitability continued to improve. Based on the median performance forecast, the net interest rate for 2024H1 was about 11.6% (+4.4pct year on year), and the net profit margin for single Q2 reached 12.1% (+1.0pct month-on-month, -1.6 pct year-on-year), and operating efficiency continued to improve.

Profit forecast and investment advice: We expect the company's net profit to be 0.17 billion yuan, 0.2 billion yuan, and 0.23 billion yuan respectively in 2024-2026, corresponding to PE of 15X, 13X, and 11X, maintaining a “buy” rating.

Risk warning: Risk of fluctuations in raw material prices, declining overseas demand, and intensifying market competition.