Incident: The company released its 2024 mid-year report, with revenue of 1.75 billion, +15.2% year on year, net profit attributable to parent company of 0.29 billion, +16.0% year on year, net profit attributable to shareholders of the parent company 0.3 billion after deduction, +19.1% year on year. The company's second-quarter revenue was 0.68 billion, +7.7% YoY, net profit attributable to the parent company was 0.07 billion, +1.9% YoY. Net profit attributable to shareholders of the parent company after deduction was 0.08 billion, +10.6% YoY. The company continuously optimizes its marketing strategy and gradually strengthens its brand influence.

Revenue from products over 300 yuan increased by 44.7%, and product upgrades continued. The company's revenue from products over 300 yuan in the first half of the year was 0.31 billion, with a gross profit margin of 74.4%, accounting for 17.8% of revenue, +3.6 pct. The company's revenue for products over 300 yuan in the first quarter was 0.19 billion, +86.5% year-on-year. Product revenue of 300 yuan or more in the second quarter was 0.12 billion, +7.1% year-on-year. The growth rate decreased compared to 86.5% in the first quarter.

The 100-300 yuan products increased 15.0% in the first half of the year. In the first half of the year, the 100-300 yuan product revenue was 0.89 billion, with a gross profit margin of 68.3%, accounting for 50.7% of revenue. Products in this price segment account for the largest share of the company's revenue.

The company's revenue of 100-300 yuan products in the first quarter was 0.55 billion yuan, and revenue in the second quarter was 0.34 billion yuan, +2.7% year-on-year.

The growth rate of 100-300 yuan products declined month-on-month compared to the first quarter. In the first half of the year, the company completed price increases for products in this price segment: Century Gold Emblem Four Star, Soft Gold Emblem H3, and H6.

The growth rate of products below 100 yuan changed from negative to positive. In the first half of the year, revenue from products under 100 yuan was 0.52 billion, +1.8% year-on-year, accounting for 29.7% of revenue. In the second quarter, revenue from products under 100 yuan was 0.2 billion, +13.3% year-on-year. The growth rate of products below 100 yuan changed from negative to positive.

As of July 31, 2024, the company had repurchased 9.714 million shares at a cost of 0.18 billion yuan. The company plans to use its own funds to repurchase the company's shares not less than 0.1 billion yuan (inclusive) and no more than 0.2 billion yuan (inclusive) for employee stock ownership plans or equity incentives.

Investment advice: We expect the company to achieve operating income of 3.078/3.622/4.192 billion yuan in 2024-2026, +20.8%/+17.7%/+15.7% year-on-year; net profit to mother of 0.404/0.489/0.588 billion yuan, +23.0%/+20.2% year-on-year, and ESP of 0.80/0.96/1.16 yuan respectively. The company has benefited from the completion of price increases for core products, and the consumption boom in the province continues, maintaining a “gain” rating.