Incident: Peach and Plum Bread released its 2024 semi-annual report. 1H24 achieved revenue of 3.021 billion yuan, down 5.79% year on year, and realized net profit of 0.29 billion yuan, down 0.60% year on year. Among them, Q2 achieved revenue of 1.621 billion yuan, down 6.33% year on year, and achieved net profit of 0.175 billion yuan to mother, up 14.24% year on year. The performance was in line with market expectations.

Short-term sales are still under pressure, and we look forward to further business optimization. 1H24 achieved revenue of 2.985 billion yuan, down 5.37% from the previous year. Consumption is still under pressure, but the company continues to cultivate the market, develop new products, and consolidate the basic market. The company's Cocoa has exploded in new products such as croissants, egg rolls, red beans, purple rice glutinous bread, and pork floss rolls, showing rapid growth, and the overall competitiveness of the product continues to improve. Looking ahead to the second half of the year, we expect the company to optimize return rates, continue to promote the implementation and optimization of production capacity, build a national production base layout, and promote continuous improvement in performance.

All regions are under pressure to promote meticulous management. North China/Northeast China/East China, the core region of 1H24 achieved revenue of 0.697/1.151/0.989 billion yuan, a year-on-year decrease of 6.7%/12.3%/3.4%; in terms of the number of dealers, the number of dealers in the North Hua/Northeast China region at the end of 1H24 was 190/273/232, a year-on-year net change of +14/-3/-9. Different regional markets are under pressure to varying degrees. On the one hand, the company continues to accelerate the refinement of its sales network in mature markets such as Northeast China and North China With sinking work, on the other hand, in response to varying degrees of divergence and differentiation in market consumption behavior, the company will provide high-quality products and personalized services in line with the needs of leading customers.

Profitability has improved, and there is still room for improvement in the future. The gross margin of the 1H24 company was 24.15%, up 0.67 pct from the previous year. It is estimated that the return rate has declined and the turnover has decreased. 1H24's sales expense ratio was 7.95%, a year-on-year decrease of 0.26 pct, and the management expense ratio was 2.10%, a year-on-year decrease of 0.06 pct. The overall cost ratio had converged. Overall, 1H24 achieved a net profit margin of 9.60%, an increase of 0.50 pct over the previous year. We believe that as subsequent production capacity continues to rise, costs are expected to continue to be thinned in the future. Future mature channels and peripheral markets are expected to reduce the overall loss rate, and there is still room for improvement in the company's net interest rate.

Profit forecast, valuation and rating: Despite current consumption pressure, the company is still actively operating, focusing on product promotion, and looking forward to expanding its market advantage after the release of production capacity. We maintain the 2024-26 net profit forecast of 0.598/0.668/0.702 billion yuan. The current stock price corresponds to PE of 15/14/13 times, maintaining an “gain” rating.

Risk warning: Raw materials continue to rise, channel expansion falls short of expectations, and new product promotion falls short of expectations.