Baby Rabbit (002043) released its 2024 interim report. The company achieved operating income of 3.908 billion yuan in the first half of the year, an increase of 19.77% over the previous year; net profit to mother was 0.244 billion yuan, a year-on-year decrease of 15.43%.

Revenue increased significantly, but net profit was under pressure. In the first half of 2024, the company achieved operating income of 3.908 billion yuan, a year-on-year increase of 19.77%; net profit to mother of 0.244 billion yuan, a year-on-year decrease of 15.43%; deducted non-net profit of 0.235 billion yuan, an increase of 7.47% year-on-year. The company accrued credit and asset impairment losses totaling 0.079 billion yuan, a significant increase over the previous year, putting pressure on performance. Among them, second-quarter revenue was 2.425 billion yuan, up 12.74% year on year, up 63.57% month on month; net profit to mother was 0.156 billion yuan, down 27.34% year on year, up 75.71% month on month. Additionally, the company plans to distribute a cash dividend of 2.8 yuan (tax included) for every 10 shares to all shareholders.

The growth of panels and whole-house customization is ideal, and the engineering customization business has declined sharply. By business, the company's decoration materials business achieved revenue of 3.282 billion yuan in the first half of the year, up 29.01% year on year. Among them, board product revenue was 2.146 billion yuan, up 41.45% year on year, board brand usage fees (including easyinstall brand usage fees) were 0.219 billion yuan, a year-on-year decrease of 11.59%, and other decorative materials were 0.916 billion yuan, up 17.71% year on year. The custom home furnishing business achieved revenue of 0.594 billion yuan, a year-on-year decrease of 11.41%. Among them, Bunny's whole-house customization business achieved revenue of 0.3 billion yuan, an increase of 22.04% year-on-year, while the engineering customization business Qingdao Yufeng and Hantang achieved revenue of 0.134 billion yuan, a year-on-year decrease of 48.63%.

Expense control has achieved remarkable results. The company's sales, management, finance and R&D expenses in the first half of the year were 3.88%, 2.82%, -0.50% and 0.74%, respectively, down 0.47, 1.69, 0.41 and 0.24 percentage points, respectively. The total cost ratio was 6.95%, down 2.81 percentage points from the same period last year. In particular, in the second quarter, various expense ratios were further reduced. The total cost ratio for a single quarter fell to 5.92%, down 1.98 percentage points from the previous year, and 2.72 percentage points from the previous month, reflecting the company's obvious results in controlling expenses.

Accounts receivable have been drastically reduced, and cash flow conditions have improved. In the first half of 2024, the company's balance ratio rose slightly by 0.44 percentage points to 47.22%, and accounts receivable fell sharply by 19.32% year on year to 0.964 billion yuan. The company made significant progress in accounts receivable management, which is also related to the company's continuous optimization of the sales system.

The net operating cash flow inflow for the first half of the year was 0.278 billion yuan, an increase of 0.22 billion yuan over the previous year. Among them, the net operating cash flow inflow for the second quarter reached 1.159 billion yuan, an increase of 0.583 billion yuan over the previous year, reflecting a significant improvement in the company's cash flow situation.

Summary and investment suggestions: The company is deeply involved in the field of decorative materials with furniture panels as the core. After more than 30 years of development, it has become one of the leading enterprises in the industry with the largest domestic sales scale, the widest channel coverage, the largest number of specialty stores, and the most comprehensive business categories. The company's business strategy is mainly based on the board business and the customized business is complemented by diversified sales channels, and continuous optimization and upgrading. In recent years, it has focused on small B-channels (home improvement companies, furniture factories, etc.), which have room for strength, and continues to steadily increase the company's market share, and the company's performance will also be resilient. The company's 2024-2026 EPS is predicted to be 0.92 yuan, 1.03 yuan, and 1.15 yuan, respectively. Corresponding to the current PE stock price, it is 10 times, 9 times, and 8 times, respectively. It is recommended to pay attention.

Risk warning: The introduction of real estate optimization policies has fallen short of expectations. “Don't stir up housing” continues to be mentioned. The implementation and results of local government bailout policies have been insufficient, and the recovery in property market sales has fallen short of expectations, leading to a decline in industry demand. The growth rate of infrastructure investment fell short of expectations, leading to a decline in industry demand. The weakening of the macroeconomy has led to insufficient consumption demand for building materials. The company's two-wing business and new product expansion fell short of expectations. The company's increased market share and performance growth fell short of expectations.