Incident: On August 9, 2024, the company released its 2024 mid-year report. 2024H1 achieved operating income of 0.86 billion yuan, a year-on-year increase of 1%; realized net profit to mother 0.068 billion yuan, a year-on-year decrease of 46%; and realized deducted non-net profit of 0.067 billion yuan, a year-on-year decrease of 42%.

Key points of investment:

24Q2 revenue and performance slightly exceeded expectations. Biyi Co., Ltd. achieved operating income of 0.86 billion yuan, a year-on-year increase of 1%; realized net profit to mother of 0.068 billion yuan, a year-on-year decrease of 46%; and realized deducted non-net profit of 0.067 billion yuan, a year-on-year decrease of 42%. Among them, in the Q2 single quarter, the company achieved operating income of 0.54 billion yuan, a year-on-year increase of 14%; realized net profit to mother of 0.058 billion yuan, a year-on-year decrease of 28%; and realized deducted non-net profit of 0.057 billion yuan, a year-on-year decrease of 24%. The company's 24Q2 revenue and performance slightly exceeded our expectations in the performance outlook.

Continue to develop categories and customers, accelerate the construction of overseas production capacity, and open up room for growth. In the air fryer sector, during the reporting period, the company and leading customer Versuni (Philips) products were put into operation simultaneously. Other global brand customer projects such as Chenbei Technology, Chefman/Cheman, Newell/Neway brand, De'Longhi/Delon, and SEB/France Cyber Group were also launched one after another to achieve orderly delivery. The company is actively digging deeper into the number of new cooperative customers in the main air fryer sector. In terms of other categories, in addition to the coffee machines already launched in the second half of 2023, the company is actively laying out potential tracks such as ice machines and environmental appliances to meet the diverse needs of customers and markets. Currently, all new categories have been put into production in small batches. In terms of overseas layout, the construction of part of the first phase of the Thai power plant project, which was invested and built by Thailand's second-tier subsidiary, is expected to be completed in the fourth quarter.

24Q2 profitability improved significantly from month to month. The 24Q2 company achieved a gross profit margin of 19.14%, a year-on-year decrease of 2.93 pcts, mainly due to the low gross margin at the beginning of the launch of the new product, but it increased 6.19 pcts month-on-month. The problems faced by the company in Q1 of insufficient production capacity and low production and sales have been solved. In terms of period expenses, the 24Q2 sales expense ratio/management expense ratio were 0.84% and 2.02%, respectively, -0.27 and -1.58 pcts year over year; the financial expense ratio was -0.92%, up 5.92 pcts year on year, mainly due to the high exchange earnings for the same period last year. The net profit margin for 24Q2 was recorded at 10.40%, a year-on-year decrease of 6.67 pcts, and an increase of 7.28 pcts over 24Q1.

Profit forecasts were lowered slightly to maintain the “gain” rating. We slightly lowered our previous profit forecast for the company. We expect to achieve net profit of 0.201, 0.232, and 0.266 billion yuan (previous values were 0.222, 0.245, and 0.278 billion yuan) in 2024-2026, respectively, -0.3%, +15.2%, and 14.7% year-on-year, corresponding to the current price-earnings ratio of 12 times, 11 times, and 9 times, respectively, to maintain the “increase” investment rating.

Risk warning: risk of exchange rate fluctuations; risk of fluctuations in raw material prices; increased risk of market competition.