Revenue declined due to high base disturbances, and increased investment weighed on 24H1 revenue/ net profit after deduction of 4.61/0.89/0.83 billion yuan, -17.6%/-42.3%/-42.8%; 24Q2 revenue/net profit/net profit deducted from non-mother 1.97/0.16/0.12 billion yuan, -20.9%/-68.1%/-73.5% YoY. Short-term performance is mainly pressured by: 1) the impact of the high base in the same period last year; 2) the company's omni-channel all-category layout, the differentiation of online e-commerce platforms, and differences in the performance of each segment brought business challenges to the company. The company is focusing on the main brand and Life-Space this year, consolidating offline channel barriers by building differentiated multi-pallets, strengthening in-depth offline distribution, and channel sinking, while strengthening the Group's overall e-commerce strategy to enable high-quality omnichannel growth. We expect EPS of 0.70/0.83/0.97 yuan in 24-26. Referring to the 24-year average PE 22x (Wind agreed expectations), we will give 24-year 22x PE with a target price of 15.37 yuan, with a “buy” rating.
Revenue from main products has declined due to increased consumer environment/competition, etc., and offline channel barriers reinforce the company's continuous improvement of brand power and actively implement a multi-brand single product strategy; due to changes in the consumer environment and increased competition, the company's main product revenue has entered a short-term adjustment stage; in the future, the company will actively adjust and optimize business strategies with the goal of improving business quality. The 24H1 Tomson Beijian main brand achieved revenue of 2.64 billion yuan (-19.8% YoY); the large single product Jianli had revenue of 0.59 billion yuan (-16.8% YoY); the probiotic brand Life-Space had domestic revenue of 0.21 billion yuan (-24.8% YoY); and LSG's overseas revenue was 0.51 billion yuan (-4.7% YoY). By channel, 24H1's domestic online/offline revenue was 1.95/2.63 billion yuan, -20.5%/-15.8%; the company continues to consolidate omnichannel sales systems such as pharmacies/supermarkets/mother and child stores through strategies such as category expansion, brand empowerment and service improvement, and continues to strengthen the competitive advantage of offline channels.
Under the combined effects of rising raw material prices and increased cost investment, the short-term net margin was pressured by 24H1 gross margin -1.8 pct to 68.6% year on year (24Q2 gross margin -3.6 pct to 66.8% year over year), of which distribution/online direct sales margin was -0.2/-6.1 pct year on year to 68.3%/72.1% year on year; the decline in gross margin was mainly due to a 172.4% year-on-year increase in the purchase price of raw fish oil; on the cost side, 24H1 sales rate +6.8pct to 39.5% year over year (of which 24Q2 + 7.9pct to 50.6%), mainly because the company increased product promotion to enhance brand potential, and the share of platform expenses increased due to changes in e-commerce platform structure and increase in paid traffic; 24H1 management fee rate was +1.8pct to 5.5% year over year (of which 24Q2 was +2.4pct to 6.5% year over year); ultimately, 24H1 net interest rate/net interest rate without return to mother was -8.3/-8.0 to 19.3%/18.0% year-on-year, respectively (24Q2 -12.3pct to 8.4%, respectively) 6.2%).
Looking forward to continued operational improvements brought about by improvements in the external environment and multi-dimensional changes. To maintain the “buying” rating, considering the slow pace of consumer market recovery, the company is still in the investment period and the impact of equity amortization, we lowered the company's profit forecast. The estimated EPS for 24-26 was 0.70/0.83/0.97 yuan (previous value 1.11/1.25/1.39 yuan), and the target price was 15.37 yuan (previous value 22.26 yuan) to maintain the “purchase”.
Risk warning: Increased competition, lower-than-expected macroeconomic performance, food safety issues.