Key points of investment:

2024 semi-annual results forecast: The company released the 2024 semi-annual performance forecast. 24H1 expects to achieve net profit of 0.90 to 0.11 billion yuan (loss of 0.043 billion yuan in the same period last year); net profit without deduction of 0.885 to 0.1085 billion yuan (loss of 0.044 billion yuan for the same period last year); of these, 24Q2 is expected to achieve net profit of 48.29 million yuan to mother of 68.29 million yuan ( The loss for the same period last year was 4.62 million yuan), and net profit not attributable to mother is expected to be 48.64 million yuan to 68.64 million yuan (loss of 4.91 million yuan for the same period last year).

Foreign OEM has recovered smoothly, and domestic sales brands have maintained rapid growth. Overseas: The company continues to deepen existing core customers and actively expand new customers, actively seize customer opportunities from inventory removal to inventory replenishment, and is expected to achieve a significant increase in 24H1's overseas foundry business shipments and a significant year-on-year increase in revenue; domestic: independent brands continue to be effective, building core brands such as Juehan and Haoshijia. Among them, the Jueyan brand performed well. According to the company war report, the GMV of the Jueyan brand was about 25 million yuan during the 618 period, an increase of 67% over the previous year, and actively expanded the category of dog snacks. Advantageous position At the same time, a new category layout was carried out. In May of this year, the Jueyan brand launched a new staple food product, Jueyanstyle dry food, which also received good market feedback.

Profit side improvements continue to be realized. 24Q2 is expected to achieve net profit of 48.29 million yuan to 68.29 million yuan (loss of 4.62 million yuan in the same period last year), and profitability improvements continue to be realized, or mainly due to: 1) Insufficient capacity utilization in the same period last year, which affected the company's profitability. Currently, it is benefiting from scale restoration and rapid release of the capacity utilization rate of the entire factory (Vietnam production base remains operating at full capacity, production capacity continues to rise in Cambodia); 2) Continued cost reduction and efficiency to improve business quality, H1 The company strengthens the management of key production bases in Cambodia, Vietnam, New Zealand, etc., improves management systems in procurement, transportation, personnel organization, etc., and strives to reduce unit production costs, improve management efficiency, and enhance order delivery capabilities.

Profit forecast and investment suggestions: Considering the smooth recovery of the company's foundry business and continuous improvement in operating quality, we expect the company's total revenue to be 2.009, 2.442, and 2.937 billion yuan respectively in 2024-2026, up 42.3%, 21.6%, and 20.3% year-on-year respectively. We expect the company's net profit to mother in 2024-2026 to be 0.177, 0.205, and 0.248 billion yuan respectively, reversing losses, +16.2% and +20.9%, respectively.

The current stock price is 19x, 16x, and 14x for 2024-2026 PE, respectively. The “integrated two wings” foundry + brand has developed comprehensively, the quality of operation has improved significantly, and the “buy” rating is maintained.

Risk warning: Overseas pet food demand falls short of expectations, market competition increases risks, brand development falls short of expectations, foreign trade frictions intensify, exchange rates fluctuate greatly, and raw material prices fluctuate greatly.