Introduction to this report:

The company's fame and new products continue to increase, and revenue performance is expected to outperform the industry.

Key points of investment:

Considering that demand is still slowly recovering and market competition is fierce, we lowered our profit forecast. The company's 2024-2026 EPS is 1.70/1.87/2.01 yuan, -7%/+10%, compared to -7%/+10% (original value 1.95/2.12/2.23 yuan, amplitude adjustment -13%/-12%/-10%). Reference peers gave the company 12xPE 2024, and lowered the target price to 23 yuan, a “gain” rating.

Performance summary: The company's performance is slightly lower than expected. The company achieved operating income of 4.729 billion yuan in 2024H1, -4.16% year-on-year, net profit of 0.759 billion yuan, year-on-year, -8.48% after deducting non-net profit of 0.658 billion yuan, and -11.91% year on year; of these, 2024Q2 achieved operating income of 2.492 billion yuan, -9.63% year on year, net profit of 0.361 billion yuan, year-on-year, -18.15%, net profit of 0.305 billion yuan year on year- 24.76%

Famous brands performed well, and the overseas growth rate was faster in Q2. According to the company's financial report, 2024H1's famous subsidiary had revenue of 0.228 billion yuan, +40% over the same period last year. 2024H1 continues to optimize the bosses+fame dual brand operation model. Fame has experienced team and channel adjustments, and revenue has increased rapidly. Looking at each channel, we expect a small single-digit decline in retail and e-commerce channels in the first half of the year. The increase in engineering channels is nearing its end, and the company's double-digit decline is expected, and overseas channels are expected to achieve single-digit growth. 2024H1's gross margin was 48.88%, -3.05 pct year on year, and the net margin was 15.84%, -0.85pct year on year; of these, 2024Q2 gross margin was 47.29%, -2.38 pct year on year, and the net margin was 14.2%, -1.62 pct year on year.

2024H1's gross profit margin for range hoods was 50.79%, -4.31% year over year, and 53% gross profit margin for gas stoves, -3.52% year over year. We expect the company's gross margin to decline due to: 1) famous products with low gross margins are growing faster, and customer unit prices are lower, which structurally lowers the gross margin level; 2) raw material price fluctuations; 3) the profit margin performance of brands such as Jindi is weak. 2024H1 company Jindi's net profit was -16.38 million yuan, which lowered the company's overall level. Meanwhile, in 2024, it is planned to distribute a cash dividend of 5 yuan (tax included) to all shareholders for every 10 shares, totaling 0.472 billion yuan. The current dividend accounts for about 62% of net profit to mother in the first half of 2024, with a dividend rate of 2.6% (current dividend/current share price).

Looking forward to the future, the company's fame and new products will continue to increase, and revenue performance is expected to outperform the industry.

Risk warning: The risk of raw material price fluctuations, increased market competition, and declining real estate completion data have an impact on kitchen appliance sales.