Incident: Biyi Co., Ltd. announced the 2024 semi-annual announcement. In 2024H1, the company achieved revenue of 0.86 billion yuan, YoY +1.1%; realized net profit to mother of 0.07 billion yuan, YoY -46.5%.

After conversion, Q2 achieved revenue of 0.54 billion yuan in a single quarter, YoY +14.3%; realized net profit to mother 0.06 billion yuan, YoY -28.3%. Looking ahead, revenue is expected to continue to grow as the company continues to cultivate old customers and expand new customers.

Q2 The company's revenue resumed growth: Q2. The export sales of small kitchen appliances in China is improving. According to customs data, the export volume of 2024Q2 small heated kitchen appliances in China was +20% year-on-year. With the company's production line run-in and personnel stability, production continues to increase. 2024H1's leading customer Philips products were put into production simultaneously, and orders from customers such as Chenbei Technology, Chefman, and Delon were delivered in an orderly manner. According to the company announcement, 2024H1 export revenue was +3% year-on-year. We judge that Q2's export sales revenue has resumed relatively rapid growth. In terms of domestic sales, the domestic air fryer industry is less prosperous. According to data from Aowei Cloud Network, the online retail volume of 2024Q2 domestic air fryers is -22% YoY. We judge that Q2's domestic sales revenue declined year over year.

Q2 profitability declined year on year: Q2 company's net return interest rate was 10.7%, -6.4 pct year on year. Q2 The company's net interest rate declined year-on-year. We believe the reasons include: 1) Q2 exchange earnings decreased compared to the same period last year. Q2 The company's financial expenses were +27.41 million yuan year over year. 2) Customers have more new products online, production efficiency is gradually climbing, and gross margin is in the process of restoration.

Q2 The company's gross margin was 2.9 pct year over year.

Q2 The net operating cash flow in a single quarter decreased year on year: Q2 The company's net operating cash flow in a single quarter was -0.13 billion yuan year on year, mainly due to the year-on-year decline in the company's sales payback.

Q2 Cash received by the company from sales of goods and provision of labor services -0.08 billion yuan year-on-year.

Investment advice: Biyi is in the first tier of the heating kitchen small appliance foundry industry, and has strong R&D and design capabilities, cost control capabilities, and production and delivery capabilities. In recent years, the company has successively pioneered well-known domestic and foreign small home appliance companies such as Philips, SharkNinja, and Supor, and is entering new tracks such as coffee machines. We expect the company's EPS from 2024 to 2026 to be 1.10/1.19/1.29 yuan respectively, maintaining a buy-A investment rating, and giving a price-earnings ratio of 15 times 2024, which is equivalent to a six-month target price of 16.51 yuan.

Risk warning: Prices of raw materials have risen sharply, and exchange rates have fluctuated drastically.