Incident: The company released its 2024 semi-annual report, and achieved revenue of 2.99 billion yuan in the first half of the year, and achieved net profit of 0.5 billion yuan, or +36.6% year over year; of these, 24Q2 achieved revenue of 1.88 billion yuan, +8.1% year over year, and realized net profit of 0.38 billion yuan, or +35.8% year over year.

High-end beers continued to be released, and volume and price increased sharply in Q2. In terms of volume, 24Q2 achieved sales of 0.435 million tons, an increase of 1.8% over the previous year; in an environment of heavy rainfall and weak overall beer demand in South China in the second quarter, it is already difficult and valuable to achieve positive sales growth. Thanks to the smooth upgrading of pure products in the province, sales of high-end products increased 14.3% year-on-year in the first half of the year. In terms of grade, 24H1 high-end, mid-range, and Volkswagen achieved revenue of 2.04/0.65/0.19 billion yuan respectively, with year-on-year growth rates of +17.2%/-13.4%/+12.0%, respectively. High-end beers continued their high growth trend. Furthermore, under the influence of cost-effective consumption, low-end products also achieved double-digit growth. In terms of price, the continuous release of high-end products, led by 97 Junsheng, led to an increase in the overall product structure. The 24Q2 company's tonnage price was +7.1% year-on-year to 4,065 yuan/ton. By channel, the revenue growth rate of regular/supermarket/nightmarket/e-commerce channels in the first half of the year was +7.8%/+36.7%/-6.7%/+13.2%, respectively. The high growth in supermarkets was mainly due to the company's active promotion of canned wine stores in its distribution channels.

Cost-side dividends continued to be released, and profitability increased significantly in Q2. 24H1's gross margin was 49%, +3.6pp year on year; of these, 24Q2 gross margin was 53.1%, +4.9pp year on year. The increase in gross margin was mainly due to the increase in the share of pure raw products, which led to the upgrading of the product structure, and the continuous decline in procurement costs for major raw materials. In terms of expenses, 24Q2's sales expenses rate was 13%, a year-on-year decrease of 0.3 pp, mainly due to the company actively controlling expenditure; the management expenses ratio was 5.4%, a year-on-year decrease of 0.5 pp, mainly due to the company implementing special activities to reduce costs and improve quality and efficiency, and operating efficiency improved steadily. Taken together, benefiting from the decline in raw material prices on the cost side and the upgrading of the product structure, the 24Q2 company's net profit margin increased by 4.1pp to 20.2% year-on-year? The trend of high-end upgrades is good, and the results in the second half of the year are worth looking forward to. The company has a good consumer base in South China. The Guangdong beer market is one of the most advanced in the country, and there is plenty of room for future product structure upgrades. In terms of products, the company has a clear high-end “3+N” brand strategy. It continues to promote alternative upgrades from 97 pure students to ordinary pure life and pure life to zero, and consolidate the market share with a price band of 8 yuan or more in the province. The company promotes collaborative development by upgrading the quality of the cultural industry, accelerates the construction progress of cultural industry projects, and deepens the integration of “dual main business” brands.

Looking ahead to the second half of the year, as the share of the company's Pure Life series products continues to rise, the downward trend in superposition costs is clear, and the low base effect gradually becomes apparent since Q3, the company's high-end upgrade trend is good, and the results in the second half of the year are worth looking forward to.

Profit forecasting and investment advice. EPS is expected to be 0.37 yuan, 0.43 yuan, and 0.49 yuan respectively in 2024-2026. The corresponding dynamic PE is 23 times, 20 times, and 17 times, respectively, maintaining the “buy” rating.

Risk warning: The recovery of the ready-to-drink scenario falls short of the expected risk, and high-end competition increases the risk.