Incident: Petty Co., Ltd. announced its 2024 semi-annual results forecast. Net profit for the first half of the year is expected to be 0.09 billion yuan to 0.11 billion yuan, turning a loss into a profit (up 310.79% to 357.63% over the same period of the previous year); net profit of 0.089 billion yuan to 0.109 billion yuan after deducting non-attributable net profit. Among them, 2024Q2 is estimated to achieve net profit of 0.048 billion yuan to 0.068 billion yuan, turning a loss into a profit (loss of 0.005 billion yuan in the same period last year).

Domestic own-brand products have been launched, and domestic revenue growth is worth looking forward to in the first half of 2024. The company's own-brand business successfully achieved the semi-annual phased target, and the revenue scale continued to grow rapidly. The company launched the Jueyan brand staple food in May 2024, focusing on “native natural ingredients” and “air drying process”. While the revenue scale of the original main categories maintained rapid growth, the new staple food products introduced were quickly accepted by the market and achieved good expected results. In 2024 618, the company's Jueyan brand performed well, with a cumulative GMV of over 25 million yuan, an increase of 67% over the same period last year. Among them, Jueyan's pure crispy meat was ranked first in Douyin puppy snacks, Tmall dog snacks, and Jingdong dog snacks. We believe that the company's own brands have performed well, and domestic revenue growth is worth looking forward to.

Overseas orders have recovered well, and the global base layout is conducive to improving risk resilience. In the first half of 2024, the company gave full play to its advantages in product research and development, overseas manufacturing, etc., actively expanded new customers, deepened cooperation with existing core customers, achieved a significant increase in ODM business shipments, and a significant year-on-year increase in revenue. The Vietnamese production base is operating at full capacity, and the capacity utilization rate of the Cambodian production base was quickly released. Furthermore, in the first half of the year, the company strengthened management of key production bases such as Cambodia, Vietnam, and New Zealand, and improved management systems in procurement, transportation, and personnel organization. We believe that the company's layout and management in multiple overseas regions is conducive to leveraging the advantages of regional raw materials, etc., and enhancing resilience to risks such as changes in export tariffs in a single region; it is also conducive to enhancing order delivery capacity and laying a solid foundation for more efficient operation in the future.

The implementation of the “One, Two Wings” development strategy was firm, and the increase in actual controller holdings showed confidence. In the first half of 2024, the company focused on its main business. All tasks were guided by the “One and Two Wings” development strategy and annual mission goals, adhering to global operations, actively exploring domestic and foreign markets, focusing on building independent brands, channel expansion, and improving the quality of project operation. The quality and quantity of business performance improved significantly. Furthermore, Chen Zhenbiao, the actual controller of the company, increased his holdings of the company's shares from January 16, 2024 until July 15, 2024. He has purchased a total of 0.8528 million shares and used a total of 10.01 million yuan of capital, demonstrating the company's actual controller's confidence in the company's long-term development.

Profit forecast: We expect the company to achieve operating income of 1.98/2.43/2.84 billion yuan in 2024-2026 and achieve net profit of 0.15/0.19/0.25 billion yuan, turning the year-on-year loss into profit/ 29%/29%. The company's overseas orders are growing well, and domestic independent brands are expected to grow rapidly and maintain a “buy” rating.

Risk warning: Risk of fluctuations in raw material prices; risk of exchange rate fluctuations; channel expansion falling short of expectations; the performance forecast is the result of preliminary calculations by the company's financial department. The specific financial data is subject to the “2024 Semi-Annual Report” disclosed by the company