Incident Overview: The company released its 24-year report. 2024H1's revenue/net profit/net profit deducted from non-net profit/operating cash flow were 12.07/0.285/0.258/0.243 billion yuan, up 27.67%/41.81%/48.13%/-2.20% year on year; looking at a single quarter, the 2024Q2 company's revenue/net profit/net profit deducted non-net profit was 0.648/0.164/0.144 billion yuan, respectively, up 25.20%/31.88%/ At 28.90%, the absolute value of Q2 revenue, net profit, and net profit deducted from non-net profit all exceeded Q1, but the growth rate was not as high as Q1. In the first half of the year, due to rising freight rates on European and American routes and tight capacity, the company's June shipment volume fell short of expectations, but 24H1 still achieved both revenue and net profit growth.

The customer growth rate is impressive and new customers continue to be developed, and the store-to-store model is progressing steadily. By product, 24H1's smart electric sofa/smart electric bed/accessories/other products achieved revenue of 9.35/0.162/0.094/0.016 billion yuan respectively, up 35.62%/11.24%/0.81%/-6.86% year-on-year. All other businesses achieved year-on-year growth. The company's core business, smart electric sofas and smart beds, all achieved more than double digit growth, and smart electric beds. By region, 24H1 achieved domestic/overseas revenue of 0.008/1.2 billion yuan respectively, up -35.23%/28.45% year on year. Domestic sales declined, but export sales continued to grow rapidly. From January to June '24, 90.05% of the company's products were sold to the US, and 79.66% of the products were exported from Vietnam; the top ten customers of 24H1 were all US customers, 70% were retailers. Most of the customers saw an increase of 7.37% to 747.06%. Among them, 4 customers increased by more than 50% and 3 by more than 200%. In the first half of the year, the company received a total of 49 new retailer customers, 6 of which were in the “Top 100 Furniture Retailers in the U.S.”

At present, the company has built more than 100 small-scale in-store stores in the stores of American retailer customers, taking the first step of “building its own brand overseas”, and most of the retail customers in the company's first batch of MOTO stores had business transactions with the company increased by more than 100%, and the lowest was over 30%.

Profitability has improved markedly, and the increase in dividend payments has led to a slight increase in sales and management expenses. 24H1's gross profit margin was 33.22%, up 1.75pct year on year. The gross margin of the company's main products, smart electric sofa/smart electric bed/accessories, increased by 1.71/0.81/7.15 pct to 33.93%/33.33%/27.80% respectively; net sales margin increased by 23.64%, up 2.36 pcts year on year, and the increase in net sales margin was optimized compared to the cost side of high gross margin.

On the cost side, 24H1 company's sales/management/ R&D/finance expenses ratio was 3.10%/3.54%/4.80%/-4.06%, respectively, up 0.58/0.77/ -1.10/-2.21pct. In a single quarter, 24Q2's gross profit margin was 33.13%, up 0.46 pct year on year, and the net sales margin was 25.36%, up 1.28 pct year on year. On the cost side, 24Q2 company's sales/management/ R&D/financial expenses ratio was 3.19%/3.73%/4.55%/-4.62%, respectively, up 0.98/0.98/ -1.47/ -1.14pct year on year. The increase in the company's sales expenses in the first half of the year was mainly due to an increase in share payment fees and market promotion business. The increase in management expenses was due to an increase in share payment fees, while the increase in financial expenses contributed to an increase in exchange earnings.

Profit forecasting and investment advice. The company has abundant high-quality customer resources, strong product strength, and good brand reputation.

In the future, with the continuous development of its own brands in foreign markets, the company's growth ceiling is expected to open up further. We adjusted the company's profit forecast. We expect the company's 24-26 revenue to be 2.401/3.024/3.834 billion yuan, respectively, and 24-26 EPS of 3.04/3.69/4.76 yuan/share, respectively. Referring to the closing price of 50.40 yuan/share on August 29, 2024, the corresponding PE is 17 times, 14 times, and 11 times respectively, maintaining the “buy” rating.

Risk warning: Exchange rate fluctuations have exceeded expectations, domestic and foreign market expansion has fallen short of expectations, and market competition has intensified.