The company discloses its 24-year interim results:

24H1: operating income 0.703 billion yuan/ +5.45%, net profit attributable to mother 0.072 billion yuan/ +9.77%, net profit not attributable to mother 0.055 billion yuan/ +6.28%;

24Q2: Operating income 0.343 billion yuan/ +5.68%, net profit attributable to mother 0.035 billion yuan/ +4.19%, net profit not attributable to mother 0.027 billion yuan/ +14.22%.

Revenue side: The share of adult health care bucked the trend, and e-commerce drives core growth subsectors:

① Adult oral care bucked the trend and increased its share of growth. 1) Adult toothpaste revenue was about 0.55 billion yuan/ +7.05%, and the company's offline toothpaste market share bucked the trend and rose to 8.57%, ranking third, and local brands second; 2) Adult toothbrush revenue was about 0.08 billion yuan/ +0.63%, and the retail share of the offline toothbrush market of the cold acid brand increased to 5.64%, ranking second in the industry and second among local brands.

② Children's oral care is generally stable. 24H1 children's toothpaste revenue is about 0.038 billion yuan/ +0.46%; children's toothbrush revenue is about 0.016 billion yuan/ -3.49%,

③ High growth in electric toothbrushes: 24H1's revenue is about 0.005 billion yuan/ +62.14%. The company is vigorously promoting electric oral care products such as electric toothbrushes and toothbrushes, gaining incremental growth and driving product structure upgrading and optimization in the booming circuit.

④ Revenue from dental care and beauty care products is approximately 0.013 billion yuan/ -10.52%.

Channel division: The revenue from the e-commerce model was about 0.161 billion yuan/ +28.5%; the revenue from the distribution model was about 0.517 billion yuan, which was the same as the previous year; the revenue from the direct supply model was about 0.02 billion yuan/ +2%, and the high double-digit increase in e-commerce became the core incremental driver.

Profit side: Structural optimization drives profit upward

The 24H1 gross profit margin is 46.93% /+4.1pct, which is expected to be driven by optimization of main products and channel structures.

24Q2 sales, management, and R&D rates are 28.5% /-1pct, 4.39% /-0.6pct, 3.51% /+0.7pct, and the cost investment is relatively stable.

The net interest rate for 24Q2 was 10.25% /-0.14pct, with a net interest rate of 7.9% /+0.6pct. The increase in gross margin led to a steady upward trend in overall profit. The net profit and loss of government subsidies and fair value changes were mainly affected by year-on-year fluctuations.

Investment suggestion: The company differentiates its position in oral anti-allergy care, stabilizes the market leader in segmented efficacy, and the overall average price is lower than the industry leader. It is expected that in the future, in the context of industry-side efficacy upgrades and channel changes driving local rise, the continuous upgrading of the company's core products is expected to drive a sharp rise in volume and price. The rapid rise of new channels on the channel side of Douyin is expected to continue, and the continuous explosion of new business is expected to contribute to new volume.

Net profit due to mother for 24/25/26 is estimated to be 0.163/0.19/0.223 billion yuan, respectively, and the corresponding PE is 26/22/19x, respectively. Considering the continuous increase in the company's share and continuous profit optimization, it is rated “Highly Recommended”.

Risk warning: Risk of product sales falling short of expectations; risk of marketing delivery falling short of expectations; risk of trustworthiness and delay in referring to third-party data.