Company Releases 2024 Interim Report

24Q2 revenue was 0.656 billion, up 0.51%; net profit to mother was 0.096 billion, down 11.70%; deducted from mother was not 0.088 billion yuan, down 3.69%. 24H1's revenue was 1.308 billion, up 2.79%; net profit to mother was 0.218 billion, a decrease of 0.59%; deducted from mother was not 0.193 billion yuan, or 0.47%.

By channel, 24H1 online was 0.528 billion, down 0.62%, accounting for 40.35%; direct sales were 0.309 billion, down 0.93%, accounting for 23.67%; franchise sales were 0.329 billion, up 1.95%, accounting for 25.15%.

The company's 24H1 gross profit margin was 55.02%, an increase of 0.83pct; of these, the gross profit margin for kit products was 57.46%, an increase of 1.38pct; the gross profit margin for quilt products was 54.65%, an increase of 1.16pct; the company's 24H1 net profit margin was 16.67%, a decrease of 0.57pct.

Online and offline development, increasing the layout of brand self-broadcasts

On the offline side, the company has adopted a flat structure for franchisees and continues to improve the retail management capabilities of stores in direct management channels. 24H1 added 60 new stores, including 38 new image stores, covering South China, Central China, North China, East China, etc.; by the end of the 24H1 period, the company had 1,531 offline stores (specialty stores, counters), including 1,033 franchise stores and 498 direct-run stores.

On the online side, e-commerce channels are one of the company's core sales channels. Tmall accounts for 24% of 24H1 e-commerce revenue, JD accounts for 48%, and Vipshop accounts for 18%. The company adheres to the concept of refined operation, establishes a product hierarchy mechanism, and coordinates the coordinated development of various e-commerce platforms. Since 2024, e-commerce platforms have been fiercely competitive, and the traffic of leading talent anchors has peaked. The company has increased its self-broadcast layout, taken into account brand and sales, and coordinated to create brand value.

Innovative artistic design, rich intellectual property rights

The company's design and development team focuses on product design and process development. Every season's products are injected with stylish and original design, giving a combination of forward-looking and classic. In the first half of 2024, the company relied on retail data insights and consumer demand analysis to continue to deepen product development, innovating, upgrading and iterating in various fields such as “Oriental Aesthetics,” “Homage to Classics,” “Material Integration,” “Technological Empowerment,” and “Functional Upgrades” to meet consumer needs and lead a sleeping lifestyle.

Adjust profit forecasts to maintain “buy” ratings

Looking ahead to the second half of the year, there are still quite a few domestic difficulties and challenges, but the favorable conditions facing China's development are stronger than the negative factors, and the steady, moderate, and long-term positive development trend will not change. The company will grasp the country's economic growth points and innovation direction for the conversion of old and new kinetic energy and consumer trade-in, actively promote technological progress, industrial upgrading and structural adjustment, and jointly provide strong impetus and broad space for the development of new productivity in the home textile industry.

Due to the small increase in 24H1's revenue, we lowered our profit forecast. We expect 24-26 revenue to be 3.123, 3.286, and 3.47 billion yuan (original values were 3.24, 3.52, 3.75 billion yuan), net profit to mother of 0.594, 0.646, and 0.705 billion yuan (original values were 0.63, 0.7, 0.75 billion yuan), EPS was 0.71, 0.77, 0.84 yuan/share, and corresponding PE was 11, 10, and 9x .

Risk warning: rising labor costs, risk of fluctuating raw material prices; risk of market competition; risk of “piracy” and “piracy” impacts, etc.