Incident: On August 17, 2024, Changhong Meiling released its 2024 mid-year report. 24H1's revenue/net profit attributable to mother/net profit after deduction was 14.948/0.415/0.433 billion yuan, or +16.52/+15.91/ +13.22% year-on-year respectively, maintaining double-digit growth; of these, 24Q2 was 9.008/0.259/0.247 billion yuan, respectively, and +15.43/+10.18/ -11.46% year-on-year respectively. Net cash flows from 24H1/24Q2 operating activities were $2.728/2.842 billion, respectively, or +93.42/ +59.45% year over year, respectively, which was a significant improvement over 24Q2.

Both 24H1 air washing have increased, and export sales performance is superior to domestic sales. By product, 24H1 air conditioner/refrigerator freezer/washing machine/kitchen and bathroom were 85/4.74/0.78/0.74 billion yuan respectively, +21.5/+12.2/+40.7/ -12.7% year-on-year, respectively, accounting for 56.9% (+2.3pct)/31.7% (-1.2pct)/5.24% (+0.9pct)/4.98% (-1.67pct). The growth rate of air conditioners and washing machines increased rapidly, but the proportion is expected to decrease. In 24Q2, air conditioners grew rapidly, and refrigerators were steady. According to industry online data, 24Q2's air conditioner and refrigerator shipments were +30.5% and +1.7%, respectively, year-on-year. By region: 24H1 domestic/overseas revenue was 10.13/4.82 billion yuan respectively, or +13.4/ +23.6% year-on-year respectively, accounting for 67.8%/32.2% respectively. The share of overseas revenue increased by +1.85pct. Domestic and foreign sales went hand in hand, and the export performance was superior to domestic sales.

The 24Q2 gross margin decreased significantly from the same period to the same period due to the increase in raw material prices, and the cost ratio was optimized during the period.

1) Gross profit margin: 11.28/ 9.89% for 24H1/24Q2, -1.58/1.81 pct year on year, and -3.5 pct month-on-month for 24Q2, of which 24H1 air conditioner/refrigerator freezer/washing machine/small household appliances and kitchen/domestic/export sales were 6.87/17.12/15.77/13.63/11.59/ 9.88%, respectively, and -1.9/-1.

15/-1.88/+1.13/-1.53/-1.65pct, with the exception of small household appliances and kitchen and bathroom, all declined, which may be mainly affected by the increase in raw material prices.

2) Expense side: 24H1 sales/management/R&D/finance cost rates were 5.58/1.05/1.92/ -0.68%, respectively, -0.55/-0.38/-0.15/+0.22pct, respectively, of which 24Q2 was 4.63/0.96/1.72/ -0.66%, and -0.37/-0.39/-0.04/+0.32pct, 24H1 and 24Q2 sales, management, and R&D expense ratios were all optimized, and the cost reduction and efficiency effects were visible.

3) Net profit margin: 2.78/ 2.88% for 24H1/24Q2 respectively, -0.01/-0.14pct year-on-year respectively.

Investment suggestions: In the domestic market, the ice washing product structure and channel structure operated under its own brand are constantly improving. Air conditioning brands use the advantages of ice washing and television to expand channels, and air conditioning foundries benefit from the rapid development of Xiaomi air conditioners; in overseas markets, the OEM business consolidates the European market, deepens in the Asia-Pacific market, breaks through the Latin American market, continuously improves customer quality and product structure, and actively lays out independent brands; domestic and foreign sales are developing collaboratively, while continuing to reduce costs and increase efficiency, revenue and profit are expected to continue to grow. We estimate that the company's net profit for 24-26 will be 0.83/0.966/1.134 billion yuan, the corresponding EPS will be 0.81/0.94/1.10 yuan, respectively, and the PE corresponding to the current stock price will be 9.38/8.06/6.86 times, respectively. Maintain a “Recommended” rating.

Risk warning: Increased industry competition, fluctuating raw material prices, falling short of expectations in independent brand expansion, trade frictions, etc.