1H24 results are in line with market expectations
The company announced 1H24 results: revenue of 1.99 billion yuan, +28.8% year-on-year, net profit of 0.154 billion yuan, +52.7% year-on-year, after deducting non-net profit of 0.154 billion yuan and +55.5% year-on-year. Among them, 2Q24 revenue was 1.04 billion yuan, +23.3% year over year, net profit to mother was 0.091 billion yuan, +27.4% year over year, after deducting non-net profit of 0.09 billion yuan, and +21.2% year over year, in line with market expectations.
Development trends
2Q24 endogenous business revenue continued to grow at a high rate, and BF's revenue recovered from high growth. 2Q24 The company's endogenous revenue increased 16.5% year on year, continuing high growth; by region, 2Q China's revenue increased by 4.2% year on year, mainly due to industry demand facing a high base and weak demand during the same period; 2Q European revenue increased by double digits, 1H overall increased 13.8% year over year, mainly due to the company expanding market share by digging deeper into the needs of leading customers, and market expansion in Eastern Europe and southern Europe; 2Q US endogenous revenue increased by the same number of units, and mainly slowed down compared to 1Q Due to the pace of delivery Due to quarterly differences, 1H24 overall achieved a better recovery in revenue after US retailers finished removing inventory. In addition, 2Q Asia Pacific and other regions continued the trend of doubling year-on-year in 1Q, and 1H's overall revenue also increased by 186%, mainly due to the company's improved sales team and continued expansion of the Asia-Pacific market. BF 2Q revenue increased 64% year over year, continuing the 1Q trend and continued to achieve high growth recovery, mainly benefiting from the end of inventory removal in the US and the good development of new personal care businesses.
2Q24 gross margin improvements drive steady endogenous profit margins, and BF's performance is still hampering. The 2Q24 company's gross margin was +2.4ppt year-on-year, continuing the 1Q improvement trend. It mainly benefited from scale effects, the company continued to reduce costs and increase efficiency, and increased service revenue and improved product structure. The 2Q sales rate was +0.6ppt year over year, mainly due to sales team upgrades such as adding a major global sales account department; the management rate was +0.4ppt year over year, mainly due to one-time expenses for BF team upgrades and advance talent reserves, etc., benefiting from continuous cost reduction and efficiency, 1H overall declined slightly. On the BF side, including asset amortization expenses, 2Q24 still lost about 33 million yuan. The slightly higher loss was mainly due to 2Q one-time team upgrade expenses, such as staff severance expenses and headhunting expenses.
Revenue growth is expected to continue in the second half of the year, so keep an eye on BF's loss reduction progress. Considering the volume of some new orders, we expect revenue growth in China to accelerate sequentially in the second half of the year, while America, Europe and other regions may continue the positive growth trend in the first half of the year. On the profit side, considering the revenue scale effect, we expect that there is still room for optimization in the second half of the year, and profit margins may be basically stable in the second half of the year. On the BF side, along with the advancement of the personal care and gummy business, we expect BF revenue to continue to grow well in the second half of the year. At the same time, considering supply chain management optimization, we expect BF's profit may gradually improve. We recommend that you pay attention to BF's loss reduction progress.
Profit forecasting and valuation
The company traded 14.5/12.2x P/E in 24/25; considering BF's performance drag, the 24/25 profit forecast was lowered by 4.5%/3.1% to 0.38/0.45 billion yuan; considering the declining market valuation, the target price was lowered 26% to 29.5 yuan, corresponding to 18/15x P/E and 25% space in 2024/25. Maintain an outperforming industry rating.
risks
Demand was weak, overseas profit margins fell short of expectations, and competition intensified.