From January to June 2024, the company achieved revenue of 0.892 billion yuan, +4.87% year-on-year; net profit to mother of 59.3281 million yuan, +6.14% year-on-year, after deducting non-return net profit of 58.7201 million yuan, +11.29% year-on-year. In 2014, Q2 achieved total operating income of 0.429 billion yuan, +1.65% year over year; realized net profit of 0.025 billion yuan, -3.36% year over year, after deducting non-return net profit of 0.025 billion yuan, +7.77% year over year.

Online growth is high, and the company focuses on developing major customers to effectively hedge the impact of the decline in revenue from the top two major customers. H1's direct sales channel was +8.54% year-on-year in '24. In the first half of this year, the company's revenue for the largest customer and the second-largest customer was -12.57%/-6.59%, respectively. The restaurant chain itself faced operating pressure. Upstream price pressure and share division put pressure on the company's operations for the first and second largest customers. Therefore, the company focused on increasing its development efforts for direct lower back customers. By the end of the reporting period, the number of the company's major customers was 178, an increase of 21.09% over the previous year. The company's growth rate for the third to fifth largest customers was high, with year-on-year growth of 105.21%/38.59%/943.38%, respectively. The company's direct sales channel still achieved good growth in the first half of the year. In addition, the company's online channel achieved revenue of 30.8585 million yuan, +81.03% year-on-year, mainly due to the company's New Year's dinner products being favored by online consumers. Under pressure from catering recovery falling short of expectations, the company increased dealer channel construction efforts, increased the number of sales and marketing personnel, led the dealer business team to develop a second batch and terminal network, and helped dealers expand customers through various methods such as tasting promotion and conference marketing. 24H1's distribution channel was +1.77% year-on-year. Looking ahead to the whole year, it is speculated that the growth of the first two major customers is still limited, but the company continues to prove its ability to expand major customers. We believe that the growth space for the upstream frozen rice and noodle industry in the chain industry is determined, and we are still optimistic about the company's development in direct management channels. Although Little B is less resilient to risk and has been slow to recover compared to Big B, it is in a steady recovery process this year.

Cooking products, dishes and other products grew better, and frying and baking declined. In terms of products, thanks to products represented by pictograms, benefiting from the rapid development of the group meal market, the company's cooking category increased 32.4% year on year, and revenue reached 0.211 billion yuan in the first half of the year; revenue in the cooking category was 0.133 billion yuan, up 18.99% year on year, mainly because the company targeted some customized prepared food products for major core customers, and on the other hand, provided some prepared food products suitable for group meals and banquet scenarios to dealer channels. Growth in deep-fried products was weak. Revenue was 0.374 billion yuan, down 4.26% year on year; bakery revenue was 0.17 billion yuan, down 8.34% year on year, presumably due to a decrease in the share of egg tarts among major core customers. In the future, the company will continue to step up development efforts for night market snack, fast food, coffee and tea chain customers, increase customized research and development of prepared dishes, and increase the cultivation of prepared dishes in the banquet channel. We believe that both baked and prepared dishes have broad room for development, and in the long run, it is still expected to bring continued growth to the company.

The company's gross profit margin in Q2 2024 was 24.95%, up 2.43 percentage points from the previous year. The increase in gross margin was mainly due to the company's effective control of raw materials and other production costs, large-scale effects, and improvements in intelligence. There was a slight increase on the company's cost side. The 24Q2 sales/management/ R&D expenses ratio was 5.13%/10.47%/1.28%, respectively, +0.48/+1.65/+0.24pct compared to the same period. Q2 net profit margin was 5.67%, -0.3 pct year over year. Currently, food and beverage consumption is showing signs of improvement, but the frozen rice and noodle industry is still under strong competitive pressure. We speculate that in order to cope with competition and maintain market share, the company's net interest rate may continue to be under pressure.

Company profit forecast and investment rating: We believe that although the growth of existing major customers is under pressure, the company's ability to expand large customers has been verified, and its prepared dishes and online performance have exceeded expectations, which is expected to drive performance growth.

Distribution channels are expected to resume further this year. In the short term, competition in the industry is fierce, and the company is under pressure on the growth of the first and second largest customers. We slightly lowered our 24-26 profit forecast. We expect the company's net profit for 2024-2026 to be 1.52, 1.74, and 199 million yuan respectively, corresponding to EPS of 1.53, 1.75, and 2.01 yuan, respectively. The current stock price is 15, 13, and 12 times the 2024-2026 PE value, respectively, maintaining a “recommended” rating.

Risk warning: Consumption capacity and consumer demand declined, and the recovery of the restaurant industry fell short of expectations; the operating risks of the top three customers indirectly affected the company's sales to major customers; food safety risks, etc.