Introduction to this report:

Guided by the company's “high-end cost performance” strategy, the off-season improves profit and verifies the autonomous supply chain logic. While existing channels maintain their growth potential, offline distribution is expected to usher in new breakthroughs, and increases can be expected.

Key points of investment:

Investment advice: Maintain an “Overweight” rating. Maintain the 2024-2026 EPS forecast of 0.99, 1.34, and 1.84 yuan, and maintain the target price of 31.39 yuan.

Results are in line with previous forecasts. 2024H1 achieved revenue of 5.075 billion yuan, +75.39%, net profit to mother of 0.29 billion yuan, +88.57% year-on-year, net profit of 0.228 billion yuan, +211.79% year-on-year; 2024Q2 single-quarter revenue of 1.429 billion yuan, +43.93% year over year, net profit to mother of -0.019 billion yuan, year-on-year loss of 0.019 billion yuan, deducted non-net profit -0.035 billion yuan Yuan, a year-on-year loss of 0.028 billion yuan. The mid-report results fell at the center of the forecast range.

Omni-channel capabilities continue to increase, and gross margin increases to verify supply chain logic. Looking at 2024H1 by channel, Douyin/ Tmall line/ Jingdong/ offline distribution revenue was +180.7%/+28.3%/+over 100%, respectively. Under the company's “short video + omnichannel” collaborative style, channel spillover and acceptance results are outstanding. We expect 2024Q2 to continue to double the trend of short video channels, mainly Douyin, and the share of comprehensive e-commerce will increase markedly. The new offline distribution layout is progressing; by category, revenue from nuts/baking/comprehensive products was +67.38.9%, respectively. /+164.8 %, gross margin was +1.54/-0.18/+0.17pct, respectively.

The overall gross margin of 2024Q2 increased by +3.2 pct to 21.9% year-on-year. The gross margin of the core nut category increased, verifying the effectiveness of the company's independent supply chain layout with one product and one chain under the “high-end cost performance” strategy, enhancing product cost performance while profit did not decrease but increase. 2024Q2 sales/management/R&D/finance rates were -0.1/-1.7/-0.2/+0.1 pct, respectively. The management rate optimization was obvious, mainly due to the transformation of the company structure to a networked organization under the integration of products and sales, enhanced collaborative ability and employees' subjective creativity and market-oriented responsiveness Significant improvement, personnel efficiency was clearly optimized. Net profit margin was +2.5pct to -1.3% year on year, and non-net interest rate was +3.9 pct to -2.4% year over year.

Distribution adapts to products and channels, and offline breakthroughs are worth looking forward to. The company's short video channels such as Douyin are expected to continue to grow strongly under category innovation. Comprehensive e-commerce undertakes growth, offline gift box sales during the Mid-Autumn Festival have increased, and the New Year Festival is expected to remain strong. At the same time, the company's new offline distribution layout is guided by actual sales. It accurately matches pallets for different terminal types, optimizes sales incentive mechanisms, and guarantees terminal profits and reasonable profit margins for dealers. Since August, 5 new dealer co-creation meetings have been held nationwide. It is expected that they will be delivered to the channel by the end of August and the beginning of September to gradually verify the logic. Offline breakthroughs and contributions can be expected.

Risk warning: increased market competition, rising raw material costs, food safety issues.