Incident: Liren Technology announced the 2024 semi-annual announcement. The company achieved revenue of 0.2 billion yuan in 2024H1, YoY -16.0%; realized net profit to mother 0.02 billion yuan, YoY -16.2%.

After conversion, Q2 achieved revenue of 0.08 billion yuan in a single quarter, YoY -11.2%; realized net profit to mother of 3.63 million yuan, YoY +92.3%. The company is continuing to expand categories such as small kitchen appliances, household appliances, and kitchenware, and revenue growth is expected to resume.

Q2 Revenue is under pressure: Due to the low boom in the domestic small kitchen appliance industry, 2024Q2's revenue continues to decline. According to Jiuqian data, Q2's online sales of electric bakes/air fryers/multi-purpose cookers were YoY -37%/-50%/+225%, respectively. We analyzed the sharp decline in revenue from air fryers and electric baking pans in Q2. 2024H1 continues to dig deeper into consumer usage needs and application scenarios, and has launched new products such as automatic cooking machines, automatic stuffing cutters, outdoor barbecues, antibacterial display boards, and electric egg whisk, which is expected to continuously enhance the competitiveness of the product market.

Q2 profitability showed an upward trend: Q2 The company's net profit margin was +2.9 pct year-on-year, mainly because the company optimized its product sales structure and strengthened cost control efforts. After cleaning up the slow-selling inventory in the early stages, the company launched new products with higher prices, which led to an increase in gross margin. Q2's gross margin was +2.7 pct year over year.

Q2 net cash flow from operating activities increased year on year: the company's Q2 net cash flow from operating activities was +10.4 million yuan year on year, mainly due to the company's reduction in stocking during the upward phase of raw material prices.

Q2 The company purchased goods and accepted labor payments in cash year-on-year - 15.14 million yuan.

Investment advice: As a pioneer of electric cake pans in China, Li Ren is the leader in the electric cake pan segment. In terms of products, the company has stocked a large number of new products in the field of small kitchen appliances, and is actively expanding into new categories such as household appliances and cookware. As domestic demand for small kitchen appliances recovers, the company's revenue is expected to recover. The company's EPS from 2024 to 2026 is expected to be 0.28/0.29/0.31 yuan, and BPS is 10.47/10.62/10.78 yuan. We maintain a buy-A investment rating and give a PB valuation of 2.2 times 2024, which is equivalent to a 6-month target price of 23.04 yuan.

Risk warning: Prices of raw materials have risen, and competition in the industry has intensified.