The company's revenue declined slightly in the first half of the year, and net profit to mother grew under the influence of retirement income and interest on convertible bonds. The year-on-year revenue/profit ratio for Q2 was -20.4%/-14.1%. In the face of challenges, the company is firm in its strategic goals, actively promotes marketing reforms, continuously optimizes performance evaluations, and takes more measures to promote growth. It looks forward to the results of the reform in the context of a gradual recovery in the external environment.

Q2 revenue/profit ratio was -20.4%/-14.1%, and performance was under phased pressure. Shouxianggu released its 2024 semi-annual report. The company's 24H1 revenue/profit was 0.353/0.101 billion, respectively, -5.1%/+11.8%. Among them, Q2 achieved revenue/profit of 0.132/0.024 billion, -20.4%/-14.1% year-on-year. Facing a complex and changing external environment, the company's performance was under phased pressure.

The basic market in the province is stable, and direct sales channels are under pressure. The company's revenue from 24H1 Ganoderma lucidum spore powder products was -6.6% to 0.23 billion. Among them, products with higher customer unit prices declined significantly, and revenue from dendrobium officinale products was -6.0% to 0.06 billion. By region, revenue within 24H1 Zhejiang Province was +7.4% to 0.24 billion, and revenue from outside the province/Internet was -24.7%/-26.6% YoY to 0.03/0.07 billion. By channel, the company's 24H1 direct sales/distribution model was -19.1%/+6.1% to 0.13/0.22 billion, respectively. Growth bucked the trend against the backdrop of more active terminal customer development within the province. Direct sales and demand from outside the province were temporarily pressured by potential exploiting and increased competition within the province.

The gross sales gap narrowed sharply, but the decline in interest contributed to a year-on-year increase in net interest rates. The company's 24H1/Q2 gross margin was -0.75/ -1.61pcts to 81.3%/78.6% respectively, of which 24H1 Ganoderma lucidum spore powder/dendrobium officinale had gross margins of -1.28/ -0.53pct to 86.5%/78.7%, respectively, mainly due to changes in product structure and increase in manufacturing costs due to the commissioning of the Yanglong factory area. The company's 24Q2 sales expenses were -14.5% to 0.065 billion, but the decline in revenue led to a sales expense ratio of +3.4pcts to 49.5% and a management expense ratio of +2.3pcts to 15.7%. Financial expenses were reduced from -1.55 million to -5.17 million due to the sharp year-on-year decline in interest on 20-year convertible bonds and the impact of capitalization of interest on 22-year convertible bonds. Under the combined impact, the company's 24Q2 net margin increased by 1.32pcts to 18.0%.

Investment advice: Performance is under phased pressure, and we look forward to the results of the reform. Facing a complex and changing consumer environment, the company's performance was under phased pressure, but the company actively promoted marketing reforms, the management team sank into markets outside the province, and continued to optimize performance evaluations. 24H1 added 7 specialty stores and 14 channels. Looking forward to the results of the reform in the context of the gradual recovery of the external environment, adjust the 24-26 EPS forecast to 1.29, 1.35, and 1.41 yuan to maintain the “gain” rating.

Risk warning: Fluctuations in the economic environment, policy changes, increased industry competition, etc.