Incident: The company released its 2024 semi-annual report. 24H1 achieved operating income of 1.99 billion yuan, a year-on-year increase of 28.85%, and realized a net profit of 0.154 billion yuan, an increase of 52.66% over the previous year. Among them, 24Q2 achieved operating income of 1.039 billion yuan, an increase of 23.29% year on year, and realized net profit to mother of 0.091 billion yuan, an increase of 27.38% year on year.
Subdosage forms: 24H1 softgels achieved sales revenue of 0.889 billion yuan, a year-on-year increase of 26.80%; gummies achieved sales revenue of 0.486 billion yuan, a year-on-year increase of 60.55%; tablets achieved sales revenue of 0.142 billion yuan, a year-on-year decrease of 17.50%; powders achieved sales revenue of 0.142 billion yuan, a year-on-year increase of 13.28%; beverages achieved sales revenue of 0.14 billion yuan, a year-on-year decrease of 14.36%; hard capsules achieved sales revenue 0.098 billion yuan, up 70.16% year over year. Softgels and gummies are the company's core dosage forms with strong technical advantages. The products are constantly being promoted and the growth is remarkable.
By region: 24H1 domestic business achieved sales revenue of 0.832 billion yuan, up 4.22% year on year; overseas business achieved sales revenue of 1.159 billion yuan, up 55.16% year on year. Among them, the American region achieved sales revenue of 0.729 billion yuan, up 65.42% year on year, Europe achieved sales revenue of 0.295 billion yuan, up 13.78% year on year, and other regions achieved sales revenue of 0.136 billion yuan, up 185.71% year on year. Looking at Q2 alone, China achieved medium to high single-digit growth. The European region's growth rate increased month-on-month, the American region's growth rate slowed month-on-month, and other regions maintained a strong growth momentum.
Specifically: 1) China Business Group: For channel customers, actively expand the customer base of pharmacies and retailers, and achieve cooperative upgrades with 3 leading customers; for brand customers, it has promoted more than 100 new projects and more than 160 product proposals, and successfully launched 37 IPD products, including explosive products such as “emulsion calcium”; 2) European division: focusing on promoting new dosage forms such as gummies, continuing to promote plant-based products, and commercializing plant-based products for the first time in the UK market. The new PureOrganix organic product line accurately fits European consumer preferences and product orientation Development in the direction of ESG; 3) American Division:
Consolidate the leading customer business, accelerate sales integration and the growth of the gummy business between China and the US, and independently operate the personal care and nutritional health food business; 4) Asia Pacific Division: Expand cooperation with leading Australian customers, increase sales share, and at the same time develop the Southeast Asian market and improve the collaborative efficiency of marketing organizations. Brand awareness in the Asia-Pacific market continues to rise, and the prospects are broad.
Gross margin increased significantly, and profitability remained at a high level. 24Q2 achieved a gross profit margin of 33.35%, a year-on-year increase of 2.4 pct, a net profit margin of 7.90%, and a year-on-year increase of 0.6 pct. On the cost side, the 24Q2 company's sales/management/R&D/finance expense ratios are
7.97%/10.17%/3.51%/2.16%, with year-on-year increases of 0.6/0.4/0.7/1.4pct, respectively. The increase in gross margin offset the impact of the cost ratio and kept overall profitability at a high level. We expect that as revenue grows in the second half of the year, various expenses will decrease as a share of sales.
24H2 is expected to continue to perform well in all regions. After the company has fully upgraded its marketing team in China, America, Europe and emerging markets, sales momentum is strong, and customers, markets, and products are constantly expanding. We expect 24H2 to continue. Looking ahead to 24H2, we believe: 1) Domestic: Although China's nutritional and health food industry is relatively weak, the company 24H1 shows strong resilience; 24H2 is expected to grow steadily in China and the month-on-month growth rate is expected to accelerate; 2) Overseas: 24H2 is expected to maintain a high growth rate in the Americas, steady growth in Europe, and the Asia-Pacific region is expected to achieve rapid growth under a low base. Furthermore, BF Personal Care's supply chain management is expected to continue to be optimized, and BF's profitability is expected to improve in the second half of the year.
Profit forecast and investment advice: As the CDMO leader in the global nutritional health food industry, the company continues to deepen collaboration in the global supply chain, R&D and sales, and is firmly advancing the “internationalization” strategy. The Chinese business still shows resilience in the face of a weak environment. The American and European regions are growing well, and the business in emerging markets such as the Asia-Pacific region is being developed more vigorously, and there is great potential for growth. We expect the company to achieve net profit of 0.39/0.486/0.564 billion yuan in 2024-26, +39%/+25%/+16% year over year. The current stock price corresponds to 2024-26 PE of 14x/11x/10x respectively, maintaining the “recommended” rating.
Risk warning: food safety incidents, market demand falling short of expectations, increased industry competition, BF integration falling short of expectations, etc.