The company announced its results for the first half of 2024:2024H1 achieved revenue of 11.836 billion yuan, -3.02% year-on-year, and realized net profit of 1.409 billion yuan to mother, an increase of 14.95% over the previous year.

Competition in the sanitary napkin business has intensified, and the company's performance is relatively good, and the tissue business is expected to improve. 1) In the first half of 2024, competition in the domestic sanitary napkin market became more intense. Domestic and foreign brands increased their efforts to expand the market. The company achieved revenue of 3.147 billion yuan, -2.2% compared with the overall sales situation of the sanitary napkin industry. Looking ahead, the company continued to promote product optimization and upgrade the sanitary napkin product “cute sleeping pants” and the high-end product “Tianshan velvet cotton” were also very popular with consumers. Pants-type sanitary napkins achieved revenue of 0.29 billion yuan in 2024H1, an increase of about 22.0% over the previous year. 2) 2024H1's tissue business revenue was 6.951 billion yuan, -3.1% year over year. The company will continue to upgrade products and increase the penetration rate of high-end products. It is expected that the tissue business revenue in the second half of 2024 will improve compared to the first half of the year. 3) In terms of the diaper business, 2024H1 earned 0.712 billion yuan, or +7.0%; the company believes that the adult diaper market has relatively large potential for development at this stage, and the share of high-end baby and adult diaper products has increased, which is expected to drive the company to maintain sales growth in the second half of the year.

2024H1's gross margin improved year over year. The net sales margin of 2024H1 was 11.37%, +1.72pct; the gross profit margin of the company was 33.26%, +2.22pct year on year, thanks to the overall increase in gross margin of the main business. Among them, 1) benefiting from the increase in the share of high-end and upgraded products and the stability of the price of petrochemical raw materials, the gross margin of 2024H1's sanitary napkin business reached 62.7%, up 0.9 pct year on year; 2) The gross margin of the 2024H1 tissue business increased 1.9 pct to 19.6% year on year, benefiting from lower wood pulp costs and high-end products Increased sales share; 3) 2024H1 achieved a significant increase in the gross margin of the diaper business, reaching 45.3%, up to +9.3 pct. Thanks to the stable price of petrochemical raw materials, the high-end product “Q? “MO” increased its share of sales. 2024H1's sales expenses ratio, management expense ratio, and financial expense ratio were 14.56%, 5.48%, and 1.30%, respectively, compared with +0.13pct, -0.26pct, and +0.04pct, respectively.

Profit forecast and rating: We expect the company's net profit for 2024-2026 to be 2.945, 3.103, and 3.203 billion yuan, respectively, up 5.2%, 5.4%, and 3.2% year-on-year. The current closing price corresponds to 2024-2025 PE of 9.5 and 9.0 times. As a leading enterprise in the field of personal cleaning and care, the company, as a leading enterprise in the field of personal cleaning and care, is given a 13 to 14 times PE valuation in 2024, corresponding to a reasonable value range of 32.94 to 35.48 yuan, at the current exchange rate (1 yuan = HK$1.09) is calculated at HK$35.91 to HK$38.67, corresponding to 2024 PS of 1.50 to 1.62 times, respectively, giving it a “better than the market” rating.

Risk warning: The decline in raw material costs falls short of expectations, market development falls short of expected risks, and market competition continues to increase risks.