The company released its 2024 semi-annual report: 2024H1 achieved revenue of 3.721 billion yuan (YoY +40.7%), net profit of 0.172 billion yuan (YoY -7.7%), net profit of 0.16 billion yuan (YoY -25.0%); 2024Q2 achieved revenue of 1.879 billion yuan (YoY +36.6%), net profit to mother 0.071 billion yuan (YoY -27.9%), net profit of 0.064 billion yuan (-50.4% year over year) The revenue side benefits from new product iterations to seize share and new platforms to continue to grow beautifully; margins are under slight pressure, mainly due to falling average prices in the context of consumption downgrade, increased shipping & storage costs, and fluctuations in financial & management expenses.

The iteration of new products is accelerating, and the outdoor series is under pressure for a short time. 24H1 furniture/home/pet/outdoor revenue was 18.96/1.335/0.309/0.133 billion yuan, respectively (+39.4%/+50.2%/+37.3%/+3.4%). The company has continued to increase its new product launch efforts in recent years, and the SKU category has gradually expanded. The 23-year new product is the core growth driver, and the 24-year new product revenue contribution is superior to the previous period, successfully driving the high growth of home furniture; the short pressure on the outdoor series is mainly due to disruptions in the shipping cycle and poor climatic conditions during the peak sales season in Europe.

The entire chain continues to be optimized, with significant improvements in North America. Revenue from 24H1 Europe/North America/Japan/other regions was 22.79/1.341/0.03/0.022 billion yuan, respectively (+41.2%/+41.1%/+30.6%/+39.4% YoY). The company's strategic focus is on the North American market H1 to launch a large number of new products, the revenue is expected to increase quarterly, and the company added 3 new cooperative warehouses in North America to increase the spontaneous ratio & optimize the shipping portfolio (FBM share increased from 8.5% to 15.7% from January to June '24), and the gross margin was still +1.98 pct year over year in the context of high shipping growth; Europe is a traditional dominant region (Amazon sites such as Germany, France, the United Kingdom, and Italy rank first in the home furniture category). The company actively expands emerging platforms such as OTTO and Shein, and optimizes the industry chain H1 added 3 self-operated overseas warehouses. The global self-operated warehouse area reached 0.3548 million square meters, and the share of European FBM increased from 63.9% to 67.4% in January-June.

Stabilize main channels and lay out emerging platforms. 24H1 Amazon B2C/B2B was +42.7%/+0.5% year-on-year respectively, accounting for a total share of 76.9%; OTTO and independent website revenue were +97.1%/91.3%, accounting for 5.0%/3.0%, respectively. Under a low base, the performance was beautiful, and the channel structure continued to be optimized. Furthermore, after Temu opened semi-hosting in March 2024, the company launched a website in the US as the first batch of sellers to successfully capture the platform's initial traffic dividends. The H2 European site is expected to follow the volume, and the company is expected to increase its investment. On the supply side, considering the intensification of international trade frictions, the company is actively developing high-quality supplier resources in Southeast Asia. Southeast Asia is expected to account for 20% of shipments to the US in Q4.

Expenses were increased, and profits were put under pressure for a short time. The gross margin of the 2024Q2 company was 33.9% (-2.2pct year on year). The fluctuation was mainly due to a decline in average prices and a rise in shipping costs (benefiting from the advantage of scale, the company's agreement price agreement is expected to be superior to the industry), and the net profit margin to mother was 3.8% ((-3.4pct year over year). The cost rate for the Q2 period was 29.6% (+5.0pct year on year), of which the sales/R&D/management/finance expense ratios were 25.0%/1.0%/3.4%/0.3% (+2.1/-0.4/-0.9/+4.2pct), respectively. The company strongly seized share, with 24H1 advertising expenses +81.4% year-on-year; the increase in financial expenses was mainly affected by exchange (23H1 profit of 17.73 million yuan, 24H1 loss 6.6 million yuan); share payment fees of 24H1 increased by 7.25 million yuan.

Stable cash flow & operating capacity. 2024Q2's net operating cash flow was $0.496 billion (+0.038 billion yuan year over year); in terms of operating capacity, the number of days receivable, payable, and inventory turnover as of 2024Q2 was 9.01/25.37/78.05 days (-1.17/+0.42/+9.53 days), respectively.

Profit forecast: The company's net profit for 2024-2026 is expected to be 0.37, 0.59, and 0.72 billion yuan, respectively. Corresponding PE is 20.3X, 12.7X, and 10.5X, maintaining a “buy” rating. The reduction in profit forecasts is mainly due to higher shipping costs than expected throughout the year, and gross margin is expected to continue to be under pressure in the second half of the year.

Risk warning: Overseas demand recovery fell short of expectations, cross-border e-commerce competition intensified, and trade frictions intensified.