The company released its mid-year report: in the first half of '24, the company achieved revenue of 4.804 billion yuan, a year-on-year increase of 31.9%; net profit to mother of 0.22 billion yuan, a year-on-year decrease of 16.2%; revenue for the 24Q2 single quarter was 2.451 billion yuan, up 25.7% year on year, and net profit to mother was 0.117 billion yuan, down 36.3% year on year. The results were generally in line with expectations.

Cross-border e-commerce: Strong overseas warehouse operation capability+supply chain advantage creates cost-effective products+multi-e-commerce platforms are working hard, and cross-border e-commerce continues to expand rapidly. 24. In the first half of the year, the company's cross-border e-commerce revenue was 1.686 billion yuan, up 240.9% year on year. In 2022, the company reorganized its e-commerce team, built a complete and high-quality supply chain system, continued to deepen the global layout brand strategy, and integrated resources into more explosive cross-border e-commerce businesses, covering mainstream third-party online e-commerce platforms at home and abroad such as Amazon, Walmart, TEMU, and TikTok. The company actively diversifies product categories, covering ergonomic chairs, lift tables, storage cabinets, functional sofas, etc.; has built a multi-dimensional brand matrix, and currently has cross-border e-commerce brands such as Sweet Furniture and Colamy; strengthened overseas warehouse operation capabilities. The company has set up warehousing and distribution centers with a total area of about 0.35 million square meters in 5 major regions of New Jersey and California, accurately covering the scope of end consumer product distribution, continuously improving terminal sales and delivery timelines and reducing cross-border logistics transportation costs.

OEM: Driven by overseas inventory replenishment and customer expansion, the OEM business has been steadily restored. 24 In the first half of the year, the company's foundry business achieved revenue of 2.46 billion yuan, up 10.6% year on year. Among them, Yongyu's subsidiary's revenue was 0.74 billion yuan, up 6.0% year on year. Excluding Yongyu's traditional foundry business revenue of 1.72 billion yuan, an increase of 12.7% year on year. While the company's OEM business is deeply involved in the European and American markets, it actively carries out active marketing by forming a new marketing team with R&D and design capabilities, providing customers with full-solution product design, and building localization teams in North America, the Middle East, etc., to enhance localized service capabilities, improve customer satisfaction, and promote business development. Driven by overseas inventory replenishment, increased company categories, and customer development, the traditional OEM business has been steadily restored in 24 years.

Actively diversify product categories around the “big home” strategy. By category, the company's office furniture revenue in the first half of the year was 1.87 billion yuan, up 14.9% year on year, up 18.5% year on year; panel furniture revenue was 0.45 billion yuan, down 10.2% year on year; new material flooring revenue was 0.73 billion yuan, up 5.3% year on year; other revenue was 1.08 billion yuan, up 410.8% year on year. The increase in other business was mainly related to the cross-border e-commerce business development category.

Under the influence of exchange earnings and rising freight rates, 24H1 profit margins are under pressure in the short term. 24 In the first half of the year, the company's gross margin was 21.2%, down 2.6 pct year on year, net margin was 5.0%, down 2.5 pct year on year. 24 The pressure on the company's profit margin in the first half of the year was mainly due to:

1) In order to increase market share and increase new product promotion and marketing fees, 24H1's sales expenses rate was 9.0%, up 0.8 pct year on year; 2) 24H1's high base of exchange earnings, 24H1's exchange income was 0.026 billion yuan, and the exchange income for the same period last year was 0.098 billion yuan; 3) 23. The company's fixed asset disposal profit (land plant levy compensation) in the first half of the year, and there was no such portion of revenue; 4) Shipping costs increased year-on-year; 5) Additional 2024 share payment fees were added in the first half of the year. million yuan.

Cross-border e-commerce continues to expand rapidly, and the OEM business is recovering steadily. The company takes advantage of cross-border e-commerce dividends to actively cultivate its own brands, concentrate resources to support cross-border e-commerce business, and embrace multiple platforms. E-commerce revenue is expected to continue to grow rapidly; the OEM business is recovering steadily. Considering the impact of rising freight rates on profits, overseas consumption was not flexible enough. We lowered net profit from 2024-2026 to 0.49, 0.629, and 0.797 billion yuan (the original value was 0.562, 0.687, and 0.837 billion yuan), which increased 86.2%, 28.5%, and 26.5% year-on-year respectively. The PE corresponding to the current market value is 9, 7, and 5 times. The valuation is cost-effective, and maintains a “buy” rating.

Risk warning: Cross-border e-commerce business development falls short of expectations, and overseas consumption recovery falls short of expectations.