Event: The company announced its 2024 interim results. The company achieved revenue of 2.3 billion yuan/year on year +25.6%, and net profit to mother of 0.42 billion yuan/year on year +37.8%. The Q2 Company achieved revenue of 1.5 billion yuan/YoY +32.2%, and net profit to mother 0.34 billion yuan/YoY +36.2%, exceeding market expectations. In 2024, the company's mid-term cash dividend amount was 0.23 billion yuan, with an interim dividend payout ratio of 56.2%.

24Q1/Q2 revenue was +15%/+32% year-on-year, and the upward growth rate exceeded market expectations: by product, 24H1's button and zipper revenue was 0.93 and 1.26 billion yuan respectively, +27.1% and +24.0% year-on-year. By region, 24H1's domestic and international revenue was 1.54 billion yuan and 0.76 billion yuan respectively, +24.8% and +27.2% compared with the same period last year.

Downstream warehousing has basically ended, and the capacity utilization rate has improved significantly: 2024H1's capacity utilization rate was 70.7% /year on year +13.6 pct, with China and overseas respectively 75.5%/+16.6 pct year on year and 49.6%/year on year +4.9 pct. The domestic capacity utilization rate improved significantly under a low base, and overseas factories gradually increased their capacity utilization rate as orders grew steadily. Currently, the company's Vietnam factory park was officially put into operation on 24.3. We believe that the Vietnam Industrial Park is built according to the company's current most advanced standards, and there are many major garment manufacturing plants in the region, so production capacity is expected to climb faster than the Bangladesh Industrial Park.

24H1 gross margin increased +0.6 points year over year to 41.8%, driving continuous improvement in profitability: 24H1 company's gross margin was +0.6 pct year over year to 41.8%, of which 24Q2 gross margin improved 0.5 points year over year to 43.9%. Looking at 24H1 by product, the gross margin of buttons was +0.3 pct to 42.1% year on year, and the gross margin of zipper was +0.3 pct to 42.9% year on year, showing a continuous improvement trend in recent years. The company's expense ratio for the period was -0.9pct to 20.1% year-on-year. Among them, sales, management, R&D, and finance expenses were 8.0% /+0.1pct, 9.1% /-0.7pct, 3.6% /-0.3pct, and -0.6% /-0.1pct, respectively. The overall cost ratio performance was steady. 2024H1's net profit to mother was 0.42 billion yuan, and the corresponding net interest rate was 18.1% /year over year +0.8 pct. Of these, Q2 net interest rate was 22.6% /year over year +0.7 pct, and profitability improved steadily.

Investment rating and valuation: 2024H1 As overseas clothing brands have basically ended, orders from the textile manufacturing industry have gradually recovered strongly, and foreign trade exports have increased significantly. The company actively grasped the upward phase of the industry and continued to strengthen its core competitiveness, and achieved excellent results in the first half of the year. Looking ahead, we still maintain the view that manufacturing is the main trend throughout the year, and we are optimistic about the certainty and sustainability of order growth in 24 years. In the medium to long term, the company continues to improve in terms of service and quality, and its share in high-end apparel brands is expected to increase; combined with the climbing production capacity in Bangladesh and the commissioning of production capacity in Vietnam to expand accessories categories such as ribbons in an orderly manner, we believe that the company is expected to maintain a relatively rapid growth trend in the future. We expect the company's net profit to be 0.71, 0.81, and 0.92 billion yuan respectively for 24-26, giving the company a “Highly Recommended” rating.

Risk warning: the risk that overseas brands will fall short of expectations; the progress of capacity expansion falls short of expectations; the risk of rising labor costs.