Core views

24H1 achieved operating income of 0.846 billion yuan, +71.64% year over year, net profit of 0.098 billion yuan, +329.38% year over year; 24Q2 achieved operating income of 0.461 billion yuan, +38.06% year over year, +20.00% month on month, net profit to mother 0.056 billion yuan, +1315.99% year on year, and +34.80% month on month. By business, 24H1 achieved revenue of 2.6.3 billion yuan, +87.85%, gross margin of 22.80%, +11.51pcts year on year; plant chewing gum revenue of 0.298 billion yuan, +114.62% year on year, gross margin of 28.95%, +7.86pcts year on year; revenue from nutritious meat snacks was 0.19 billion yuan, +38.39% year on year, gross margin of 29.87% year on year, +16.82 pcts year on year. Looking at the subregion, 24H1's foreign revenue was 0.69 billion yuan, or +87.8% year on year, gross margin was 27.1%; domestic revenue was 0.16 billion yuan, +24.6% year on year, and gross margin was 23.2%. The company's foreign revenue increased year-on-year, and gross margin was stable, which was the main growth point for performance. Looking ahead to the second half of the year, the company's overseas orders are highly visible, combined with raw material inventory management, and strong overall profit certainty. Against the backdrop of continued strength of its own domestic brands, it is expected to usher in good growth throughout the year as overseas production capacity climbs.

occurrences

The company released its 2024 semi-annual report. 24H1 achieved operating income of 0.846 billion yuan, +71.64% year on year, net profit of 0.098 billion yuan, +329.38% year on year; 24Q2 achieved operating income of 0.461 billion yuan, +38.06% year on year, +20.00% month on month, net profit of 0.5.6 billion yuan year on year, +34.80% year on month.

Brief review

1. 24H1 profit increased significantly, and export sales continued to recover

By business, 24H1 achieved revenue of 0.263 billion yuan, +87.85%, gross margin of 22.80%, +11.51pcts; plant chewing gum revenue of 2.9.8 billion yuan, +114.62%, gross margin of 28.95%, +7.86pcts year on year; revenue of nutritious meat snacks was 0.19 billion yuan, +38.39% year on year, gross margin was 29.87%, year-on-year +16.82 pcts; staple food and wet food Revenue of 82.0732 million yuan, +34.86% year over year, gross margin was 22.23%, +3.20pcts year over year.

By region, 24H1's foreign sales revenue was 0.69 billion yuan, or +87.8% year over year, mainly affected by overseas customer inventory adjustments. The 23H1 base was small, with gross margin of 27.1%; domestic sales revenue was 0.16 billion yuan, +24.6% year over year, and gross margin was 23.2%.

In terms of expenses, 24H1's sales expenses were 50.8574 million yuan, +17.57%; management expenses were 49.7938 million yuan, -13.37% year over year; financial expenses were -10.8375 million yuan, -2983.62% year over year, mainly due to increased exchange earnings; and R&D investment of 1414.0.55 million yuan, +12.50% year over year.

In terms of profit margin, 24H1's gross sales margin was 26.4%, +10.9 pcts year on year, net sales margin was 11.7%, year on year +20.4 pcts; 24Q2 gross sales margin was 28.0%, +11.9 pcts year on year, +3.7 pcts month on month, net sales margin was 12.3%, +13.9 pcts year on year, and +1.4 pcts month on month.

2. 24H1 pet food exports increased rapidly. The company's export business benefited from overseas customer inventory adjustments in the first half of '23. Overall pet food exports declined significantly. Against the backdrop of a low base, 24H1 pet food exports increased year-on-year. According to customs data, in January-June, China exported a total of 0.1588 million tons of pet food (dogs and cats), +29.57% year over year; the cumulative export value was 4.979 billion yuan, +24.58% year over year. In July, the export volume of pet food was 0.0296 million tons, -11.39% month-on-month, +23.43%; the export value was 0.961 billion yuan, -6.95% month-on-month, +19.91% year-on-year. The company's product exports account for a relatively large share. In 24Q2, overseas revenue was about 0.381 billion yuan, accounting for 80% + of revenue. The significant increase in overseas revenue contributed to the recovery of the company's performance. Looking ahead to the second half of the year, export growth is expected to slow down, and overall single-digit growth may be maintained.

3. Private brands have grown significantly, and overseas production capacity continues to climb

In terms of overseas factories, ① Vietnam's plant has a capacity utilization rate of nearly 100%, of which 24H1 Vietnam Dexin achieved net profit of 30.98 million yuan. ② The Cambodian factory has a production capacity of 0.0112 million tons, with a capacity utilization rate of about 90%. 24H1 Juewei Food's net profit is 18.4 million yuan, and the annual revenue target is 0.3 billion yuan (24H1 achieved revenue of 0.168 billion yuan). ③ The New Zealand plant was put into operation. 24H1 lost 5.63 million yuan and is expected to release about 20% of production capacity this year. In terms of its own brands, 24H1's brand operating revenue was about 0.16 billion yuan, an increase of 24.6% over the previous year, and the annual revenue target was 0.4-0.5 billion yuan. Among them, the Jueyan brand performed well in the dog snack market, continuously strengthening its penetration in the middle and high-end markets. Sales revenue increased by about 60% in the first half of the year, and the comprehensive gross margin for 24Q2 was 38%-40%; the Haoshijia brand mainly uses self-operated channels, and the brand's gross profit margin is over 40%. With the launch of new products and investment in social media resources in the second half of the year, it is expected to usher in good growth.

4. Investment recommendations and ratings: 24H1 achieved both revenue and profit increases in all categories of products, a high year-on-year increase in foreign revenue, and stable foreign gross margin, driving the company's performance growth. Looking ahead to the second half of the year, the company's overseas orders are highly visible, combined with raw material inventory management, and strong overall profit certainty. With the continued strength of its own domestic brands, it is expected to usher in good growth throughout the year as overseas production capacity climbs. Based on comprehensive considerations, we expect the company to achieve operating income of 1.938/2.391/2.83 billion yuan, net profit to mother of 0.171/0.202/0.245 billion yuan, EPS of 0.69/0.81/0.99 yuan respectively, and corresponding PE of 18.07x/15.29x/12.57x respectively, maintaining an “incremental” rating.

Risk analysis

① Risk of fluctuations in raw material prices: The raw materials used in the company's production are mainly raw skin, chicken, vegetable starch, etc., which are affected by various factors such as changes in market demand. If the price of raw materials fluctuates greatly, it will bring uncertainty to the company's working capital arrangements and production cost control. ② Overseas business risk: With the continuous release of production capacity at overseas production bases and the continuous increase in investment projects, the scale of the company's overseas operations rapidly expanded, and the scale of assets and number of employees also increased rapidly, posing challenges to the company's management level, internal governance structure, and effective implementation of internal control measures. ③ Risk of exchange rate fluctuations: The company's export business mainly uses the US dollar as the settlement currency. In recent years, with the internationalization of RMB and the increase in the degree of exchange rate marketization, exchange rate fluctuations have had an uncertain impact on the profitability of the company's export products.