Operations were under pressure in the second quarter, and profits declined somewhat. In 2024H1, the company achieved revenue of 4.73 billions/ -4.2%, net profit attributable to mother 0.76 billion/ -8.5%, and net profit not attributable to mother 0.66 billion/ -11.9%. Among them, Q2 revenue was 2.49 billion/ -9.6%, net profit attributable to mother 0.36 billion/ -18.2%, and net profit not attributable to mother 0.3 billion/ -24.8%. The company plans to implement a mid-term dividend, with a cash dividend of 5 yuan for every 10 shares, and the corresponding cash dividend rate for H1 is 62%.

Affected by real estate, the consumer environment, and the high base for the same period last year, the company's Q2 operations were under pressure; however, with the gradual implementation of the country's trade-in policy, demand for replacement of household appliances such as smoke stoves is expected to be released, driving the steady recovery of the company's operations.

The performance of the main categories is relatively stable. H1's smoke machine revenue fell 2.9% year over year to 2.26 billion, and gas stove revenue fell 1.2% to 1.17 billion yuan. Against the backdrop of a 21.7% drop in the completed area of H1 housing, demand for traditional smoke stoves is showing resilience. The company's emerging categories are under relatively more pressure. The second category group: all-in-one machine/steamer/oven revenue was -11.2%/-18.5%/-23.5% year-on-year, and the third category group: dishwasher/water purifier/water heater/integrated stove revenue was -4.0%/-23.6%/+14.8%/-10.7%.

Promote the development of dual brands, and their fame is growing rapidly. Facing the entry of kitchen appliances into an era of stock, the company actively promotes the operation of the Boss+ Famous brand. Its reputation is positioned as a new utilitarian kitchen appliance, facing the mid-range market to meet the demand for cost-effective and high-quality products. The revenue of the 2024H1 subsidiary Mingqi Electric increased by 40.5% year on year to 0.23 billion yuan; the net interest rate reached 1.6%, +1.5pct year on year. With the gradual formation of the famous product matrix and offline channel layout, it is expected that Fame will continue to grow rapidly in the future and achieve a steady increase in profits.

Gross margins are under pressure, and sales delivery has been optimized. Q2 The company's gross margin was 2.4 pct to 47.3% year over year, which is expected to be affected by factors such as raw material costs, increased share of fame revenue, and pressure on market demand. The company's Q2 sales/management/ R&D/finance expense ratios were -1.2/+0.7/+0.6/-0.5pct, respectively, to 23.8%/4.7%/4.4%/-1.8%, respectively. The company appropriately optimized marketing expenditure and improved output efficiency. Q2 Company's net profit margin was 14.5%, a year-on-year decrease of 1.5pct.

Risk warning: Competition in the industry has intensified; raw material prices have risen sharply; the recovery in industry demand falls short of expectations.

Investment advice: Lower profit forecasts, maintain the “superior to the market” rating, and maintain a stable position as the leader in traditional tobacco stoves. Fame is expected to continue to drive incremental contributions. Considering the real estate completion performance and demand for kitchen appliances, the profit forecast was lowered. The company's net profit for 2024-2026 is expected to be 1.7/1.79/1.88 billion (previous value was 1.91/2.08/2.25 billion), with a growth rate of -2%/+6%/+5%; diluted EPS = 1.79/1.89/1.98 yuan, corresponding to PE = 10/10/9x, maintaining the “superior to the market” rating.