Key points of investment:

Incident: The company released its 2024 mid-year report. 24H1 achieved operating income of 1.27 billion yuan, a year-on-year increase of 12.9%, and net profit to mother of 0.11 billion, a year-on-year decrease of 34.6%. After deducting non-return net profit of 0.099 billion yuan, a year-on-year decrease of 10.9%. It is estimated that in a single quarter of 24Q2, the company achieved operating income of 0.65 billion, a year-on-year increase of 10.3%, a year-on-year net profit of 0.05 billion, a year-on-year decrease of 46.7%, after deducting non-return net profit of 0.047 billion, a year-on-year decrease of 14.8%. Revenue was in line with expectations, and profit was lower than expected. The company plans to pay a cash dividend of 1.5 yuan (tax included) for every 10 shares, and plans to distribute a cash dividend of about 0.06 billion, accounting for 55.3% of net profit due to mother for 24 and a half years.

Investment rating and valuation: Considering the pressure on food and beverage demand, the profit forecast is estimated to be 0.235 billion, 0.27 billion, and 0.3 billion (previous 0.28 billion, 0.32 billion, 0.36 billion), respectively, with year-on-year changes of -22%, +14%, and +12%, respectively. The latest closing price corresponding to 2024-26 PE is 19x, 17x, and 15x, respectively, maintaining an increase rating. On a medium- to long-term perspective, based on R&D innovation capabilities and a mature supply chain system, we continue to be optimistic that the company's Western-style complex business will achieve steady growth through deep binding leading restaurant chain customers+new customer expansion. On the other hand, the company will continue to rely on R&D advantages to capture new trends in C-side consumption and new product development, and provide a full range of flavor and product solutions for B-side C-side consumers.

Growth resumed in 24Q2, with steady growth on the B-side. According to the 24-year report, by business, it is estimated that 24Q2 empty revenue increased by about 9% year on year, and B-side business revenue increased by about 11% year on year. Among them, 1) empty revenue in a single quarter is expected to return to positive growth. It is expected that 618 will increase investment, while measures such as new products, new flavors, IP co-branding, and offline promotion will further broaden consumption scenarios and groups; 2) against the backdrop of pressure on catering demand, the B-side business has maintained double-digit revenue growth. By category, 24Q2 achieved revenue of 0.3 billion, 0.29 billion, and 0.04 billion in compound seasonings, light cooking solutions, and beverage and dessert ingredients, respectively, of +10%, +11.8%, and +3%, respectively.

24Q2 profitability is under pressure. According to the 24Q2 mid-year report, the difference in the 24Q2 company's return to home and non-growth rate is mainly due to the profit contribution of housing levy compensation accrued during the same period last year. The gross margin of the 24Q2 company was 32.1%, down 2.4 pct from the previous year. The main reason is 1) the increase in B-side revenue share, 2) the demand for catering is under pressure, and the company's market share is prioritized, which is expected to squeeze the profit margin of the B-side business. In terms of cost ratios, 24Q2 sales, management, R&D and finance cost ratios changed by +0.3, -1.4, +0.3, and +0.1 pct year-on-year, respectively. Overall, the net interest rate after deducting non-return to mother was 7.2% in 24Q2, a year-on-year decrease of about 2.1 pct.

The catalyst for stock price performance: the quantity of light cooking food exceeded expectations, and the downstream restaurant boom recovered

Core hypothetical risks: the growth rate of large single products is slowing down, the recovery in the restaurant boom falls short of expectations, food safety risks