Key points of investment

Event: Company releases 2024 mid-year report:

2024H1: The company achieved revenue of 0.892 billion yuan, +4.9% year on year; net profit to mother 0.059 billion yuan, +6.14% year over year; deducted non-net profit of 0.0587 billion yuan, +11.29% year over year.

2024Q2: The company achieved revenue of 0.429 billion yuan, +1.65% year over year; net profit to mother 24.75 million yuan, -3.36% year over year; deducted non-net profit of 25.05 million yuan, +7.77% year over year.

Big B-side mid-waist customers are booming, and demand for small B-side banquets weakens, and revenue has dropped sharply. By sales model, the direct-business/distribution channel 2024H1 achieved revenue of 0.412/0.476 billion yuan respectively, or +8.5%/+1.8% year-on-year, respectively. Among them, the largest customer 2024H1 revenue -12.6% year-on-year, considering the main factors:

1) The same period last year was in a food and beverage rebound period, with a high base; 2) The largest customer diversified suppliers, increased demand for cost reduction and efficiency, and increased competition squeezed the company's existing individual products to a certain extent. In terms of category, revenue from bakery products mainly supplied to the largest core customer was -8.34% year-on-year in 2024H1. From this, it can be seen that the company's core order revenue was greatly impacted by demand and competitive pressure. The revenue growth of direct sales customers was mainly driven by mid-tier customers. When split, the number of the company's 24H1 major customers reached 178, +21% over the same period last year. Direct sales revenue other than the top five customers was +49.5% year-on-year, and the growth rate was strong. Revenue growth is weak due mainly to distribution channels being dragged down by banquet channels.

Maintain strategic strength and maintain steady deduction of non-net interest rates. The net interest rate for 24Q2 was 5.77%, -0.3 pct year on year; net interest rate without return to mother was 5.84%, +0.33pct year on year. Among them, 24Q2 gross profit margin was 24.95%, year-on-year +2.43pct; sales expenses ratio was 5.13%, gross sales difference 19.82%, and year-on-year +1.96pct.

24Q2 management/ R&D/ finance cost rates were 10.47%/1.28%/-0.18%, respectively, +1.65/+0.24/-0.45pct. The increase in gross margin was clearly mainly due to a drop in raw material prices and an increase in production efficiency. At the same time, against the backdrop of weak demand and competition being squeezed, the company maintained its strategic strength and was not disturbed by the price war. Specifically, 24H1's direct sales/distribution gross margin was -0.28/+4.16 pct year on year, respectively; the deep-fried/cooking category contributed significantly, +4.24/+4.66 pct year over year.

Profit forecast and investment rating: The company focuses on serving B-side catering customers, and is optimistic that the company will continue to grow under strong R&D and customer advantages. Considering the weak revenue from the company's distribution channel, we slightly lowered the company's profit forecast. The company's revenue for 2024-2026 is 2.03/2.23/2.46 billion yuan (the previous forecast was 2.08/2.32/2.63 billion yuan), the year-on-year growth rate is +6.8%/10.1%/10.2%, and the estimated net profit to mother is 0.145/0.166/0.18 billion yuan (the previous forecast was 0.16/0.19/0.22 billion yuan), +8.3 billion yuan year on year %/ 14.1%/8.8%, corresponding PE is 16x, 14x, and 13x, respectively, maintaining a “buy” rating.

Risk warning: Food safety risk, raw material price fluctuation risk, risk of increased market competition, risk of unstable performance due to high revenue share of major customers.