Q2 The company's revenue/profit was +1.65%/-3.36%, respectively. Big B's revenue growth rate recovered month-on-month, while at the same time developing direct waist customers. The small B channel digested early inventory, compounded weak demand for banquets and social catering, putting pressure on Q2 revenue. Looking ahead to 24H2, distribution channels will continue to increase customer coverage for banquets, group meals, etc. Direct sales channels expect new products to be introduced, and revenue will gradually recover as demand picks up. The profit side benefits from product structure and cost optimization contributions, and profitability is expected to improve. We expect EPS to be 1.44 and 1.70 yuan in 24-25, corresponding to 16xPE in 24, maintaining the “gain” rating.

Incident: The company released its 2024 semi-annual report. Revenue for the first half of 2024 was 0.892 billion yuan, +4.87% year over year; net profit to mother was 0.059 billion yuan, +6.14% year over year; net profit after deducting non-return to mother was 0.059 billion yuan, +11.29% year over year. 24Q2 achieved operating income of 0.429 billion yuan, +1.65% year over year; net profit of 0.025 billion yuan, -3.36% year over year; net profit of non-return to mother 0.025 billion yuan, +7.77% year over year. The performance was in line with expectations. The increase in Q2 revenue was mainly due to order recovery and new products from big B channel customers.

Q2 Big B channel growth resumed, and small B channel demand was weak, and revenue declined. By channel, 24H1's direct operation/ distribution revenue was 0.412 billion/0.476 billion, respectively, or +8.54%/+1.77%, accounting for 46.44% %/ 53.56% respectively. Looking at Q2 alone, the Big B channel achieved more than double digit growth over the same period last year. Big B customers such as Yum and Haidilao resumed growth, while at the same time developing direct sales customers at the waist. The small B side's early digestion inventory sales were weak, and delivery returned to normal in the second half of Q2. According to the small B channel scenario, demand for Q2 banquets and social food consumption was weak, and demand for group meals performed well. By category, 24H1 deep-frying class/ cooking/ baking/ cooking and others achieved 3.74/0.211/0.17/0.133 billion, respectively, -4.26%/+32.40%/-8.34%/+18.99%, respectively. The rapid growth in cooking mainly benefited from increased penetration rate of group meal channels, and the increase in the cooking category came from the increase in product development and the increase in C-side prepared dishes. The year-on-year decline in deep-frying and baking products was due to limited room for growth in the core single product, sesame balls, and the decline in the share of large customers for bakery products, respectively. The number of 24H1 dealers in the North District/South District decreased by 34 and 84 respectively. The decrease in the number of dealers was mainly due to the company's optimization of the dealer structure and greater support for large dealers.

The decline in costs is beneficial to the increase in gross margin, and the net interest rate of the increase in cost investment was 0.3 pct year over year. The 24Q2 company achieved a gross profit margin of 24.95%, an increase of 2.4 pct over the previous year. The gross margin optimization was due to the year-on-year decline in the prices of some raw materials. There was an increase in the cost side in Q2. The sales expense ratio increased by 0.5 pct to 5.13% year over year, mainly due to the company increasing the number of market personnel and increasing the promotion costs of online sales platforms. The management cost ratio was +1.7 pct to 10.47% year over year, brought about by an increase in employee remuneration, social security expenses, and depreciation of new equipment, and the R&D cost rate was +0.2 pct to 1.28% year over year. The company's Q2 net profit margin was -0.3 pct to 5.77% year on year, achieving a non-net interest rate of 5.84% and +0.3 pct year over year, and the non-profit margin was optimized.

Investment advice: Revenue is under slight pressure. Focus on the recovery of the H2 small B side. Q2 The company's revenue/profit was +1.65%/-3.36%, respectively. Big B's revenue growth rate recovered month-on-month, while at the same time developing direct waist customers. The small B channel digested early inventory, compounded weak demand for banquets and social catering, putting pressure on Q2 revenue. Looking ahead to 24H2, distribution channels will continue to increase customer coverage for banquets, group meals, etc. Direct management channels expect new products to be introduced and revenue will gradually recover. The profit side benefits from product structure and cost optimization contributions, and profitability is expected to improve. We expect EPS to be 1.44 and 1.70 yuan in 24-25, corresponding to 16xPE in 24, maintaining the “gain” rating.

Risk warning: macroeconomic impact, intensification of industry competition, impact of channel changes, sharp rise in costs, demand recovery falling short of expectations, etc.