Incident: The company announced its 2024 semi-annual report. 24H1 achieved revenue of 3.431 billion yuan, +14.2% year over year; realized net profit of 0.229 billion yuan, +10.0% year over year; realized net profit of 0.225 billion yuan without return to mother, +10.1% year over year. The 24Q2 company achieved revenue of 1.635 billion yuan, +10.3% YoY; realized net profit of 0.099 billion yuan, +16.8% YoY; realized net profit of 0.097 billion yuan without deduction to mother, +17.0% YoY. At the same time, it is proposed to distribute a cash dividend of 1.0 yuan (tax included) for every 10 shares in the medium term.

Gross margin declined due to product restructuring, and cost ratio benefit channel adjustments continued to be optimized. (1) Product side: 24H1's fashion jewelry/traditional gold/leathergoods/brand licensing and franchise services achieved revenue of 16.54/1.477/0.148/0.123 billion yuan respectively, +6.0%/+31.4%/-26.1%/+41.0% year-on-year. Among them, the share of low-margin gold products increased to 43.0% (+5.64pcts), leading to 24H1 comprehensive gross margin of -2.75pcts to 24.2% year over year. (2) Channel side: 24H1 continued to promote steady channel expansion through the franchise model. During the reporting period, there was a net increase of 52 stores, including a decrease of 17 self-operated stores and a net increase of 69. The total number of company stores reached 1,451. 24H1's self-operated/franchise/wholesale channels achieved revenue of 1.725/1.647/0.051 billion yuan respectively, -4.0%/+43.7%/+9.3% year-on-year. Among them, the reduction in the share of self-operated channels (-9.49pcts compared to the previous year) also enabled the company to show excellent control capabilities in terms of cost rates.

The 24H1 company's expense ratio during the period reached 14.6%, -2.65pcts year on year, resulting in a net profit margin of 6.7%, which was relatively stable (-0.25pct) year on year.

Combining cultural heritage and fashion trends, 24H1 takes the product strength and brand power to the next level. In the first half of the year, the company's brands continued to focus on brand imprint series to create more differentiated new products. The main brand Chao Acer has launched eight new series of rich product matrices around “Stylish Oriental, Exquisite and Versatile”. At the same time, the Chinese version of “T” released the “2024/25 Lottery Jewelry Trend” across borders to highlight the brand's influence.

Investment advice: We maintain our previous profit forecast. We expect the company to achieve operating income of 6.922/8.292/9.662 billion yuan in 24-26, achieve net profit of 0.385/0.444/0.523 billion yuan, EPS of 0.43/0.50/0.59 yuan respectively, and PE corresponding to the latest stock price is 10.3/8.9/7.6 times, respectively, maintaining a “buy” rating.

Risk warning: consumption recovery falls short of expectations; impact of gold price fluctuations; intensification of industry competition