Incident Overview. Weixing Co., Ltd. released its 2024 semi-annual report. 24H1 achieved revenue of 2.296 billion yuan, +25.57% year over year, net profit to mother of 0.416 billion yuan, +37.79% year over year, net profit after deducting non-attributable net profit of 0.401 billion yuan, +33.65% year over year. In 24Q2, revenue was 1.496 billion yuan, +32.20% year over year, net profit due to mother was 0.338 billion yuan, +36.17% year over year, net profit without return to mother was 0.325 billion yuan, +31.06% year over year.

Since 24H1 has 14.49 million government subsidies, while 23H1 is 7.62 million, net profit to mother grew faster than deducted.

Revenue from button and zipper products grew rapidly, and capacity utilization increased year-on-year. 1) Revenue splitting: Button products lead the revenue growth rate, and the international region's revenue growth rate is fast. By product, 24H1, button revenue was 0.927 billion yuan, or +27.13%, accounting for 40.39% of revenue, up 0.50 pct; zipper revenue was 1.259 billion yuan, +24.02%, accounting for 54.82% of revenue; revenue from other apparel accessories was 0.076 billion yuan, or +23.23%, accounting for 3.32% of revenue. By region, 24H1, domestic revenue was 1.536 billion yuan, +24.81% year over year, accounting for 66.91% of revenue; international revenue was 0.76 billion yuan, +27.15% year over year.

2) Capacity utilization: 24H1 orders increased significantly, leading to a significant increase in capacity utilization. 24H1, total button production capacity is 5.9 billion, zipper 0.44 billion meters, capacity utilization rate is 70.73% (23H1 is 57.11%), mainly due to the obvious inventory removal effect of downstream brand clothing customers, the textile industry is stable and improving, and manufacturing side performance is good; moreover, along with the completion and commissioning of the company's Vietnam Industrial Park, overseas market popularity and customer satisfaction continue to increase, driving order growth and increasing capacity utilization. By the end of 24H1, the company's domestic production capacity accounted for 82.07%, mainly distributed in Linhai City, Zhejiang Province, Shenzhen City, Guangdong Province, etc., with a capacity utilization rate of 75.49%, and overseas production capacity accounting for 17.93%, mainly in Bangladesh and Vietnam, with a capacity utilization rate of 49.59%.

Expenses are well controlled, and net interest rates continue to rise. 1) Gross margin side: 24H1, gross margin of 41.80%, +0.58 pct year on year, of which the gross margin of button products was 42.09%, +0.27 pct year on year, and the gross margin of zipper products was 42.89%, +0.34 pct year on year; domestic and international gross margins were 41.28% and 42.85%, respectively. In 24Q2, gross margin was 43.87%, +0.49 pct year over year. 2) Rate side: 24H1, sales rate, management rate, R&D rate, and finance rate were 7.97%, 9.07%, 3.61%, and -0.59%, respectively, +0.12, -0.68, -0.14 pct; 24Q2, sales rate, management rate, R&D rate, and financial rate were 7.17%, 7.00%, 3.11%, and -0.68%, respectively. Among them, in 24H1, the year-on-year increase in sales rates was mainly due to the year-on-year increase in sales staff and employee remuneration +36.5%; the decline in management rates and R&D rates was mainly due to the dilution of revenue growth. 3) Net margin side: 24H1, net margin was 18.27%, +1.80 pct year on year; 24Q2, net margin was 22.77%, +0.84 pct year on year.

The 2024 mid-term cash dividend plan was announced, and the cash dividend ratio reached 56.22%. 24H1's net profit to mother was 0.416 billion yuan. The company decided to distribute a cash dividend of 2.00 yuan (tax included) to all shareholders for every 10 shares based on a total share capital of 1.169 billion shares, for a total of 0.234 billion yuan, with a cash dividend ratio of 56.22%.

Investment advice: We expect the company to achieve operating income of 4.703, 5.326, and 5.911 billion yuan in 2024-2026, +20.4%, +13.3%, and +11.0%, respectively; net profit to mother will be 0.704, 0.81, and 0.913 billion yuan, respectively, +26.2%, +15.0%, and +12.7%, corresponding to PE of 21, 18, and 16 times, maintaining the “recommended” rating.

Risk warning: International trade risks, fund-raising projects falling short of expectations, rising factor costs, etc.