Event: The company released the 2024 semi-annual results report. 24H1 achieved revenue of 3.235 billion yuan, +20.23% year over year; realized net profit of 0.417 billion yuan, +53.99% year over year, gross margin increased 3.4 pct to 31.81%, and net margin increased 2.83 pct to 12.96%. Looking at Q2 alone, 24Q2 achieved revenue of 1.606 billion yuan, +29.15%, and -1.40% month-on-month; net profit to mother of 0.229 billion yuan, +44.38% year-on-year, +21.74% month-on-month; gross profit margin of 33.59%, +3.53 pct month-on-month; net profit margin of 14.08%, +1.31pct year-on-month, and +2.22pct month-on-month.

Revenue and net profit to mother increased significantly, and gross margin reached a ten-year high. The company 24H1 achieved revenue of 3.235 billion yuan, +20.23% year over year, and achieved net profit of 0.417 billion yuan, or +53.99% year over year, mainly due to the recovery of domestic and foreign markets and the gradual recovery of the industry. The company adheres to the strategy of explosives, quickly seizes the market, and the company's domestic sales grew rapidly. The company's 24H1 gross margin increased by 3.4pct to 31.81%, and its gross margin in China/abroad increased by 3.99/4.27pct respectively, showing the results of the explosive product strategy.

The overall cost rate is relatively stable. 24H1's sales/management/R&D/finance expense ratios were 5.60%, 5.38%, 6.46%, and -0.34%, respectively, with year-on-year changes of -0.35, +0.06, +0.11, and +1.30pct, respectively. Among them, financial expenses were due to a decrease in exchange earnings.

Seize industry opportunities and continue to advance the explosive product strategy. 24H1 The domestic downstream textile industry is improving, and the industry has entered the inventory replenishment cycle. The momentum to replenish textile and garment stocks in major overseas markets such as the US has been actively unleashed, and exports of all types of products in the industry have shown an increasing trend. With 24M6, China's industrial sewing machine exports increased by 30.13% to 0.146 billion US dollars, and export volume also increased by 23.78% to 0.4985 million units, all of which are new highs since September '22. The company seizes this round of industry recovery opportunities and actively promotes explosives strategies in the context of the continuous promotion of the “small order quick reverse” model in the textile and garment industry, and launched the explosive product “Quick Return King” and “Gaojiao Wang” at 23M6/24M6 respectively. The explosives strategy is expected to push the company to seize share and lead the upgrading of the product structure, and performance can be expected.

Investment advice: We expect the company to achieve revenue of 6.578/7.929/9.474 billion yuan in 24-26, and achieve net profit of 0.803/1.016/1.289 billion yuan, corresponding to PE 16.4/13/10.2 billion yuan, respectively, and maintain a “highly recommended” rating.

Risk warning: risk of falling overseas demand, export risk and exchange rate risk, risk of rising raw materials