In the second quarter of 2024, the company's revenue was +7.7% YoY, and net profit was +1.9% YoY. In the first half of 2024, the company achieved total operating income of 1.754 billion yuan, +15.2% year-on-year; net profit to mother of 0.295 billion yuan, +16.0% year-on-year.

Among them, the second quarter of 2024 achieved total operating income of 0.678 billion yuan, +7.7% YoY; realized net profit to mother 0.074 billion yuan, +1.9% YoY.

The 2024Q2 product structure declined, but the gross margin side showed steady performance. By product, 2024Q2's revenue for products above 300 yuan/100-300 yuan/100 yuan/100 yuan or less was +7.1%/+13.3%. The product structure declined mainly due to the resilience of popular price demand during the off-season in the second quarter, and Jinhui Samsung and Four Stars contributed the main growth rate.

2024Q2 gross margin was +2.63 pcts year-on-year, which is expected to be 1) cost-side improvement due to reduced promotional activities; 2) contribution to price increases for some products. Looking at the subregion, 2024Q2 revenue within and outside the province was +8.30%/+1.10%. The province began marketing transformation in the second half of 2020, focusing on consumer cultivation, and the basic market was further stabilized; the number of dealers outside the province increased by 130 month-on-month, adding small businesses with alcohol resources to the previous group buyers, and the sales team expanded.

Due to differences in the pace of external donations, 2024Q2 net profit without return to mother was +10.6% year-on-year. The overall 2024Q2 fee rate remained stable. 2024Q2 net profit margin -0.63 pcts year-on-year, mainly due to increased non-operating expenses and increased income tax rates: 1) 2024Q2 non-operating expenses increased 17.21 million yuan year over year, of which 24H1 foreign donations increased 16.01 million yuan year over year, and were transferred to Positive Energy Foundation for charity and other projects. Foreign donations from previous years occurred in the second half of the year, and it is expected that 2024H2 non-operating expenses will fluctuate significantly; 2) 2024Q2 corporate income tax rate 24.3% year over year + 17.1 pcts, mainly because some of the company's sales companies achieved profits in the first half of the year, reducing deferred income tax assets during losses in previous years, and the tax on the reporting side increased a lot.

The pre-closing end was +9.3% year-on-year, and the repurchase of shares progressed smoothly. 2024Q2 sales revenue was 0.639 billion yuan/year over year -12.8%; as of the end of Q2, the company's contract debt was 0.483 billion yuan, down 0.148 billion yuan month-on-month at the end of the first quarter, down 0.148 billion yuan month-on-month, +9.3% year over year; weak off-season demand in the second quarter was common in the liquor industry, dealers were not very motivated to pay, and the company still had a basic market advantage in popular prices in the province. Under the Mid-Autumn Festival peak season, the inventory channel was at a low level. Improvements are expected. In March, the company announced plans to repurchase shares for employee stock ownership plans or equity incentives. By the end of July, the company had repurchased shares and paid a total amount of 0.181 billion yuan. With the steady completion of this year's repurchase plan, it is expected to gradually advance the incentive plan starting next year.

Risk warning: macroeconomic and liquor demand recovery fell short of expectations; competition within and outside the province intensified, etc.

Investment advice: Looking ahead to the company's operating pace in the second half of the year, there is a high degree of certainty that the annual revenue target will be achieved, and the cost investment may be increased under pressure from industry demand. The previous forecast was slightly lowered. The expected revenue for 2024-2025 is 3.005/3.577 billion yuan, +17.9%/+19.0% (previous value was 18.2%/19.4%); net profit to mother is 0.392/0.475 billion yuan, +19.3%/+21.2% (previous value was 23.4%/26.3%); the current stock price corresponds to 23.2 times P/E in 2024, maintaining the “better than the market” rating.