24Q2's revenue was +8.44% YoY to 1.457 billion yuan, and net profit to mother +3.38% YoY to 0.17 billion yuan. The dyeing and finishing business grew rapidly, and sales growth in the wool & cashmere business drove revenue growth. Gross margin continued to rise: Net profit margins declined due to foreign exchange. The estimated net profit for 24-26 is 0.443 billion yuan, 0.502 billion yuan, and 0.563 billion yuan, respectively. The current market value corresponds to 24PE11X and 25PE10X, maintaining a highly recommended rating.

Revenue and profit increased steadily. 1) 24H1 revenue increased 10.14% year over year to 2.556 billion yuan, new production capacity was released one after another, and the increase in sales volume of various products drove revenue growth. Net profit to mother increased 4.51% to 0.266 billion yuan year on year, and net profit after deducting non-net profit increased 5.77% year on year to 0.26 billion yuan. 224Q2 revenue increased 8.44% year over year to 1.457 billion yuan. Net profit attributable to mother increased 3.38% year on year to 0.17 billion yuan, and after deducting non-net profit, increased 5.43% year on year to 0.166 billion yuan

The rise and fall in the volume and price of wool and cashmere drove revenue growth. The dyeing and finishing business increased rapidly, and the growth rate of export sales was slightly better than domestic sales.

1) By product: 24H1 worsted yarn revenue of 1.479 billion yuan (YoY +10.01%, same below), of which sales volume +13.33%: cashmere 0.677 billion yuan (+19.65%), of which self-marketing volume +39.01%: wool yarn 0.361 billion yuan (-5.32%); modified treatment, dyeing and cashmere processing 0.022 billion yuan (+44.64%) 2) By region: 24H1 domestic sales increased 9.45% to 1.672 year on year billion yuan, accounting for 65.41% of revenue, export sales increased 11.48% year-on-year to 0.884 billion yuan, accounting for 34.59% of revenue.

Gross margin increased, financial expense ratios increased due to exchange rate fluctuations, and net profit margins declined.

1) 24H1: gross margin +0.50pct to 20.84%, a) By product: wool worsted yarn gross margin +1.40pct to 27.09%, cashmere-2.06pct to 14.21%, wool strip-0.30pct to 5.45% modified treatment, dyeing and cashmere processing +1.24pct to 30.83%: b) By region: domestic sales gross margin +1.07pct to 22.66% year over year, export sales -0.52pct to 17.38%.

The cost ratio for the period was +1.63pct to 7.67% year-on-year, including the management expense ratio +0.04pct (mainly due to increased share payment fees due to stock incentive plans) and +1.68pct (mainly due to increased interest expenses and increased exchange losses due to exchange rate changes). Net interest rate -0.68pct to 10.88% 2) 24Q2: gross margin +0.42pct to 21.55% yoy, period expense ratio +1.84pct yoy to 7.09%, net margin -0.67pct yoy to 12.24%.

Cashmere business revenue increased and profits declined. 24H1 New Zealand cashmere revenue increased 25.12% year on year to 0.533 billion yuan, net profit decreased 16.63% year on year to 0.034 billion yuan, net interest rate -3.16 pct to 6.30% year on year, UK Duncan revenue decreased 0.15% year on year to 0.16 billion yuan, net profit decreased 75.71% year on year to 0.003 billion yuan, net profit decreased 75.71% year on year to 0.003 billion yuan, net interest rate -5.03 pct to 1.62% year on year

Cash flow has recovered, and inventory turnover efficiency has improved. 1) Cash flow: 24H1 net cash flow of 0.063 billion yuan from operating activities, 2) Inventory: The number of inventory turnover days as of the end of June '24 was 164 days, compared to 13 days year on year. 3) Accounts receivable: The number of accounts receivable turnover days until the end of June '24 was 41 days, and production capacity remained flat compared to the previous year, and production capacity was actively promoted. The 15.000 equipment involved in the second phase of the company's 60.000 spindles high-grade worsted eco-yarn project has been put into operation: the subsidiary, the first phase of the New Australian and Vietnam 50.000 bond high-grade worsted eco-yarn textile dyeing and finishing project is expected to be completed and put into operation one after another from the end of this year to 2025: The subsidiary's 20,000-spun high-quality worsted wool (velvet) yarn construction project in Yinchuan, New Australia is scheduled to be put into operation one after another in 2025H2.

Profit forecasting and investment advice. The company's wool & cashmere two-wheel drive, global wool-worsted yarn production capacity expands in an orderly manner, product categories expand, and production capacity bottlenecks are expected to ease as new production capacity is released; cashmere production capacity utilization continues to increase, and blended products further broaden the market and improve profitability. Considering the uncertainty of downstream demand, we slightly adjusted our profit forecast. We expect revenue scales of 4.932 billion yuan, 5.542 billion yuan, and 6.162 billion yuan respectively for 24-26, with year-on-year growth rates of 11%, 12%, and 11%, respectively. Net profit to mother was 0.443 billion yuan, 0.502 billion yuan, and 0.563 billion yuan, respectively, with year-on-year growth rates of 10%, 13%, and 12%, respectively. The current market value corresponds to 24PE11X and 25PE10X, maintaining a highly recommended rating

Risk warning: Risk of fluctuations in raw material prices, risk of uncertain international trade environment, and risk of insufficient capacity utilization hampering profit performance due to failure to accept orders as expected.