2024H1's revenue performance grew steadily, and a high percentage of dividends gave back to shareholders, maintaining the “Buy” rating company 2024H1 to achieve operating income of 7.35 billion yuan (+15.5% year over year, same below), net profit of 0.5 billion yuan (+15.1%) to mother, net profit of 0.52 billion yuan (+4.0%) after deducting non-return to mother net profit of 0.52 billion yuan (+4.0%). Looking at a single quarter, the company achieved operating income of 3.88 billion yuan (+12.3%), net profit to mother of 0.28 billion yuan (+11.2%), and net profit of 0.28 billion yuan (-19.0%) after deducting non-return net profit of 0.28 billion yuan (-19.0%) in 2024Q2. Considering the sharp year-on-year reduction in the exchange revenue of the 2024H1 company and the acceleration of future smart factory investment, we lowered our profit forecast. The company's net profit for 2024-2026 is 1.63/1.91/2.2 billion yuan (original value was 1.8/2.01/2.33 billion yuan), corresponding EPS was 1.76/2.05/2.36 yuan, and the corresponding PE is 12.8/10.9/9.5 times. I am optimistic that the company's smart factory construction will accelerate and become intelligent The moat was deeply forged to maintain a “buy” rating.

Profitability: The gross margin remained stable, and the increase in the financial expense ratio was 23.6% (flat) of the company's 2024H1 gross margin (flat), and the period expense ratio was 14.5% (+1.4pct). Among them, the sales/management/R&D/finance ratio was +3.1%/+6.9%/+4.8%/-0.2%, respectively, compared with +0.2/+0.2/flat/+0.9 pct, respectively. Among them, the increase in the financial expense ratio was mainly due to the significant appreciation of the US dollar during the same period in 2023. Under the combined influence, the company's 2024H1 net sales margin was 6.9% (flat), and the net profit margin after deducting non-return to mother was 7.1% (-0.8pct).

Looking at a single quarter, 2024Q2's gross profit margin was 24.9% (+1.4pct); the period expense ratio was 15.0% (+5.2pct).

Under the combined influence, the company's net sales interest rate was 7.2% (-0.3pct), after deducting the non-return net interest rate of 7.2% (-2.8pct).

Revenue splitting: the upward growth rate of overseas demand is impressive

By product, 2024H1 achieved revenue of 5.18 billion yuan (+15.2%), gross margin of 24.2% (+0.85pct), packaging ancillary products achieved revenue of 1.39 billion yuan (+11.1%), gross margin of 21.8% (-2.1pct); environmentally friendly paper and plastic products achieved revenue of 0.55 billion yuan (+28.8%), and gross margin of 21.6% (+1.2pct).

We expect 2024H2 consumer electronics to soon enter a peak demand season, and the company's 3C packaging orders are expected to continue to be steady, leading to steady revenue growth along with the successive introduction of tobacco and alcohol package customers. By region, 2024H1 achieved domestic revenue of 5.13 billion yuan (+9.5%), gross margin of 21.1% (+0.4pct), foreign revenue of 2.22 billion yuan (+32.2%), and gross margin of 29.4% (-2.2pct).

Company highlights: The acceleration of intelligent chemical plants, the high dividend ratio rewards shareholders for active global layout, and the acceleration of intelligent chemical plants. The company currently has more than 50 production bases and 5 service centers in 10 countries and more than 40 cities around the world. As of June 30, 2024, the company's first overseas smart factory (smart factory in Vietnam) was put into operation, and 6 new smart factory construction has been launched. Looking forward to 2024H2. We believe that as the global delivery layout becomes more and more perfect and the level of intelligent production is further improved, the company's profitability is expected to advance further improvements. The high dividend ratio rewards shareholders. 2024H1 plans to distribute a cash dividend of 0.33 yuan per share and a cash dividend of 0.3 billion yuan (tax included) to all shareholders, accounting for 60.7% of 2024H1 net profit to mother. The high dividend ratio also reflects the company's positive feedback to shareholders.

Risk warning: Tobacco and alcohol package customers fall short of expectations, fluctuating prices of upstream raw materials, and fluctuating exchange rates.