Incident: 24H1's total revenue was 1.179 billion yuan, +0.75% year over year; net profit to mother - 0.03 billion yuan, +33.02% year over year. 24Q2 total revenue was 0.454 billion yuan, -7.54% YoY; net profit to mother -0.055 billion yuan, -9.67% YoY.

Revenue from brewing storage is under pressure, and ready-to-drink adjustments are in place and ready to go. By product, 1) 24Q2 brewing business revenue was 0.129 billion yuan, -23%, mainly due to increased inventory digestion and increased commercial discounts during the Q2 off-season. Sales performance is expected to improve month-on-month in August. Currently, the company's new healthy products, such as fresh polishing, are nearing completion. It is expected to be launched at 24H2, which is expected to meet the needs of high-end consumer groups in Tier 1 and 2 cities, promote customer acceptance, and further contribute to the increase. 2) Revenue from the ready-to-drink business was 0.313 billion yuan, which was basically the same year on year. The main work of the Q2 company was mainly product positioning & brand strategy sorting and channel adjustment, and actual implementation actions were relatively delayed. Among them, Meco fruit tea achieved 10% + growth based on existing operating experience, and sales of frozen lemon tea fell below expectations. Main line 1 showed a year-on-year decrease in demand for early tasting in 24 years; 2. Under e-commerce strategy adjustments, online sales declined year-on-year. Looking forward to the future, along with the development of multiple channels of origin and catering, consumer awareness of the newly positioned “healthy iced drink” is expected to further increase, and the ready-to-drink business is expected to continue to grow by double digits in Q3. By the end of 24Q2, the number of dealers was 1,175, +356/+164 year-on-year, respectively. The company actively promoted the establishment of a catering channel dealer team. By the end of 24Q2, the company had developed more than 100 full-time ready-to-drink catering channel dealers.

Lower costs have boosted gross profit margins, and government subsidies have disrupted net interest rate performance. Net profit margin for 24Q2 was -1.9pct to -12% year on year, mainly due to a decrease in government subsidies: 1) Gross profit margin: 24Q2 +2.1pct to 25.7% year over year. The procurement costs and freight for the main raw materials decreased. Currently, the company's procurement contract for the new fiscal year has been signed, and the year-on-year cost decline is expected to continue in the second half of the year. 2) On the cost side, the 24Q2 sales rate was -1.7 pct to 35.6% year on year, mainly due to a decrease in marketing expenses and advertising investment in Q2; the 24Q2 management fee rate (including R&D) was +1.9 pct to 14.4% year over year, main equity incentive expenses increased year over year (24H1 +0.009 billion yuan year over year), other income was -0.017 billion yuan year on year, and the main reason was a decrease in government subsidies (24H1 -0.024 billion yuan year over year).

Profit forecast: 24H1's product planning, organizational structure, channel model, etc. have been basically sorted out. We expect sales to gradually get on track in the second half of the year. Taking into account the external environment and the company's various business developments, we adjusted the net profit to the mother for 2024-2026 to 0.306/0.356/0.409 billion yuan (previous value was 0.33/0.42/0.51 billion yuan), +9%/17%/15% (previous values were +19%, 26%, 22%), corresponding PE was 14/12 /11 times, maintaining the “gain” rating.

Risk warning: Fluctuating raw material costs, risk of falling short of expectations in ready-to-drink business expansion, increased risk of competition in the beverage industry, etc.