Incident: The company released its 2024 semi-annual report. During the reporting period, it achieved revenue of 3.021 billion, a year-on-year decrease of 5.79%, and realized net profit of 0.29 billion yuan, a year-on-year decrease of 0.6%, and realized deduction of 0.278 billion yuan in non-net profit, a year-on-year decrease of 1.19%. It is estimated that 24Q2 achieved revenue of 1.621 billion, a year-on-year decrease of 6.33%, achieved net profit of 0.175 billion yuan, an increase of 14.24% over the previous year, and achieved deducted non-net profit of 0.169 billion yuan, an increase of 12.14% over the previous year. In line with previous performance reports. The company's mid-term dividend plan is to pay 1.2 yuan in cash (tax included) for every 10 shares, accounting for 66.21% of the semi-annual net profit to mother.

Investment rating and valuation: The profit forecast is basically maintained. Net profit for 24-26 is expected to be 0.605, 0.691, and 0.825 billion yuan, respectively, with year-on-year increases of 5%, 14%, and 19%. The corresponding EPS is 0.38, 0.43, and 0.52 yuan, respectively. The current stock price is 15, 13, and 12x for 23-25 PE, respectively, maintaining an increase rating. Looking at the long term: 1) The baking industry is a growing sub-sector that continues to be booming, and the short-warranty bread circuit has more potential for growth; 2) The company continues to expand production capacity to expand the market, enhance supply chain advantages and channel network advantages, and raise the market share level of the segment.

Demand is lackluster, and revenue performance is under pressure. Looking at the subregions, the 24H1 North China/Northeast China/East China/Central China/Southwest/Northwest/South China were -6.7%/-12.3%/-2.9%/0.2%/-3.5%/-14.4%, respectively. Among them, the year-on-year growth rates of North China/Northeast China/East China/Central China/Southwest/ Northwest/ South China were -8.4%/-11.0%/-4.1%/-4.1%/-4.1%/-4.1%/-4.1%/-18.0%, respectively. The performance of the Tohoku region has been hampered by factors such as regional population movements. The Quanzhou plant in South China has been put into operation, but the biggest decline in the second quarter was due to the sales team and market expansion methods still being adjusted, compounded by weather factors. The company accelerated market development. The number of dealers in 24Q2 was 980, a net increase of 9 over the previous year.

Profitability has improved. 24H1 achieved a gross profit margin of 24.2%, with a year-on-year increase of 0.7 pct. Of these, 23Q2 gross profit margin was 25.1%, an increase of 2 pcts year-on-year. The main reason was that the company's product sales strategy changed from revenue assessment to profit assessment. In terms of cost ratio, 24H1 company's sales/management/R&D/finance cost rates were 7.9%/2.1%/0.5%/0.6%, respectively, -0.3 pct/ -0.1 pct/ flat/+0.2 pct year-on-year, respectively. The company continued to optimize expenditure, and 24H1 achieved a net interest rate of 9.6%, an increase of 0.5 pct over the previous year.

The catalyst for rising stock prices: revenue growth accelerates

Core hypothetical risks: food safety issues, increased industry competition