Introduction to this report:
Profitability is expected to continue to recover as the company continues to reduce costs and increase efficiency and the efficiency of all aspects of operation after overseas channel adjustments.
Key points of investment:
Considering that the company is in a period of store expansion, the upfront investment is relatively large. The company's Q2 performance expectations were slightly lower. We lowered our profit forecast. We expect EPS to be 0.24/0.32/0.37 yuan (original value 0.30/0.37/0.45 yuan, amplitude modulation -21%/-13%/-17%), +8%/+35%/+16%. Referring to comparable companies in the same industry, we gave the company 24xPE in 2025, lowered the target price to 7.8 yuan, and lowered it to a “prudent increase” rating.
Performance summary: The company's 2024H1 achieved operating income of 0.322 billion yuan, +0.22% year on year, net profit of 0.032 billion yuan, or -15.19% year on year; of these, 2024Q2 achieved operating income of 0.163 billion yuan, +7.83% year on year, and net profit to mother 0.009 billion yuan, or -53.42% year on year.
The high growth of offline channels has led to stable domestic sales, and overseas growth is relatively rapid. 1) Domestic business revenue of Q2 independent brands stabilized. The domestic business of the 2024H1 Beiding brand accounted for 69%, compared with -9%, and the domestic business of the 2024Q2 Beiding brand accounted for 70% of the domestic business, which was the same as the previous year. After four quarters of declining revenue, we expect the company to adopt a relatively proactive spending strategy, which will drive revenue growth in Q2 back up. Reason for the split: The reason why Q2's domestic business revenue for its own brands is stabilizing mainly comes from offline channels. In the domestic sales business of the company's own brands, the direct sales model accounted for 64%, -12% (online direct sales accounted for 53.3%, -17%; offline direct sales accounted for 10.2%, +27% year-on-year), and the distribution model accounted for 36%, -4% year-on-year (WeChat/JD/ offline/other distribution models accounted for 12%/8%/7%/10%, respectively, year-on-year, -11%/-23%/+329.9%/-22%). Other channels include gift channels, Taobao distribution, and other third-party customer groups Non-proprietary channels such as purchases. 2024H1 has opened 7 new Beiding offline experience stores in Chengdu, Shanghai, Suzhou, Beijing, Chongqing, Changsha, and Tianjin. Currently, the number of terminal stores is 34. Benefiting from the restoration of offline consumption scenarios and continuous optimization of the company's operations, the company's offline direct sales achieved revenue of 22.847 million yuan, with an average revenue of 0.67 million yuan per store. Furthermore, we expect the new growth brought by Sam's Club to be an important reason for the increase in the company's offline distribution channels. At the performance level, 2024Q2 gross margin was 48.26% (-1.49pct) and net margin was 5.73% (-7.53pct). 2024H1's proprietary brand gross profit margin was 57.8% (-1.54pct); OEM/ODM gross profit margin 19.46% (+8.92pct).
Looking forward to the future, profitability is expected to continue to recover as the company continues to reduce costs and increase efficiency and the efficiency of all aspects of operation after overseas channel adjustments.
Risk warning: the risk of raw material price fluctuations and increased market competition.