Core view: Pediatric care has maintained a good boom, and the performance growth rate is expected to improve in the second half of the year.

Performance was in line with expectations, maintaining a “buy” rating. The company achieved operating income of 1.904 billion yuan in the first half of '24, an increase of 7.95% year on year, and realized net profit to mother of 0.119 billion yuan, a year-on-year decrease of 14.38%. Among them, 24Q2 revenue was 0.897 billion yuan, up 4.98% year on year, and realized net profit to mother of 0.092 billion yuan, a year-on-year decrease of 18.90%. The performance was in line with expectations. The previous rating did not anticipate a year-on-year increase in retail sales. The overall performance base for the second half of 23 is low, and the performance growth rate for the second half of 24 is expected to correct. Maintaining the forecast, the company's net profit for 24-26 is estimated to be 0.189/0.252/0.335 billion yuan, corresponding to PE 14.89/11.17/8.39, maintaining a “buy” rating.

The department store retail sector and Sanfengqiao sector were under pressure as a whole, and revenue and gross profit declined. Overall 24H1 consumption was under pressure, and the company's department store retail sector and Sanfengqiao sector's revenue and gross profit declined. 24H1, the department store retail sector achieved revenue of 0.313 billion yuan, yoy -15.35%, and gross profit of 0.108 billion yuan, yoy -21.00%. The 24H1 Sanfengqiao segment achieved revenue of 0.118 billion yuan, yoy -10.39%, gross profit of 0.054 billion yuan, and YOY -3.53%.

Among them, the decline in Q2 revenue accelerated; department store 24Q2 revenue was 0.116 billion yuan, yoy -25.64%; Sanfengqiao 24Q2 revenue was 0.042 billion yuan, yoy -17.65%. The decline in revenue and gross profit in these two sectors is the core reason for the decline in the company's performance.

Pediatric care has maintained its boom, and both income and gross profit have increased. 24H1 healthcare business revenue was 1.434 billion yuan, yoy +17.17%, achieving gross profit of 0.118 billion yuan, yoy +35.54%. Of these, 24Q2 achieved revenue 7.

1.8 billion yuan, yoy +14.20% The 24H1 gross profit margin of the healthcare business was 8.22%, an increase of 1.11pct over the previous year.

The gross profit margin of 24Q2 alone reached 8.92%, an increase of 1.40pct compared to the 24Q1 gross profit margin of 7.52%.

In terms of holding subsidiaries, Dongfang Auto's performance exceeded expectations, and Junyao Medical turned a loss into a profit. An important holding subsidiary of the company, Dongfang Auto 24H1 achieved net profit of 0.212 billion yuan, an increase of 22.35% over the previous year; Junyao Medical 24H1 turned a loss into profit and achieved net profit of 0.017 billion yuan, an increase of 246.17% year on year, while Sanfengqiao Meat Shop 24H1 achieved net profit of 0.004 billion yuan, a year-on-year decrease of 66.40%.

Children's health expenses are relatively immediate. Focus on the continuation of the pediatric health boom in the second half of the year. 23 In the second half of the year, the company accrued impairment losses of 0.016 billion in accounts receivable and 0.025 billion in impairment losses of goodwill. The performance base for the second half of 23 was low. The company's core growth point is still the pediatric medical business. The core logic is that children's health expenses are just needed in the overall consumer circuit, and the current view has not changed. If the pediatric medical business boom can be maintained, results can still be expected in the second half of 24.

Risk warning: (1) the risk that the revenue and profit of the department store retail sector and Sanfengqiao sector will continue to decline; (2) the risk that the pediatric medical boom falls short of expectations; (3) the risk that research reports are delayed or not updated in a timely manner.