The company's 2024H1 revenue was +3.0% year on year, and net profit to mother was -8.8%. Performance was under pressure. The company published semi-annual reports: 2024H1 achieved revenue of 9.362 billion yuan (+3.0% year over year, same below) and net profit to mother of 0.17 billion yuan (-8.8%); 2024Q2 achieved revenue of 4.173 billion yuan (-0.2%), and net profit to mother of 0.022 billion yuan (-53.8%). We believe that the company is committed to high-quality development, that the equity incentive plan is expected to stimulate internal growth momentum, and that the layout of new business formats such as snack chains and discount stores is worth paying attention to. We keep the company's profit forecast for 2024-2026 unchanged. We expect net profit to be 0.215/0.257/0.302 billion yuan for 2024-2026, the corresponding EPS is 0.34/0.40/0.47 yuan, and the current stock price is 23.4/19.6/16.6 times, maintaining a “buy” rating.

The company's revenue performance in the first half of the year was steady, with good growth in regions outside the province, but profitability was under pressure. By category, the fresh/food washing/department store category achieved revenue of 3.86/4.47/0.29 billion yuan, respectively, +4.4%/+4.2%/-8.9% year-on-year; by region, Shandong/regions outside the province achieved revenue of 7.1/1.51 billion yuan respectively, +2.6%/+9.6%. The company's subsidiary outside the province made good progress in reducing losses. Among them, Welehui supermarket in Inner Mongolia achieved operating income of 0.54 billion yuan (+11.4%) and operating profit of 0.02 billion yuan (+241.8%). In terms of profitability, 2024H1's comprehensive gross margin was 23.6% (-0.5pct), and the fresh/food/washing/department store categories were 17.4%/19.2%/34.0%, respectively, +0.8pct/-0.3pct/-2.7pct. The company focused on customer needs, continuously optimized categories, and improved the quality/price ratio of products, which led to a slight decrease in the overall gross margin, but also led to a 13.7% increase in customer traffic in comparable supermarket stores; in terms of expenses, the sales/management/finance expenses ratio was 17.6%/1.9%/1.4%, respectively. Basically stable.

Promote channel network development with high quality and continue to deepen the layout of new business formats for snack stores and discount stores (1) Channel optimization: The company focuses on key regions, optimizes the store structure, and improves the network layout. In 2024H1, 27 new direct stores and 42 franchise stores were opened. At the end of the period, there were 997 direct-run stores and 100 franchised stores.

(2) Online and offline integration: The company has built and perfected an omnichannel collaboration platform for online and offline integration and interaction. 2024H1 online sales ratio is about +22%, online customer flow is +18.5% year over year, and maintains good profitability.

(3) New business format layout: The company continues to deepen the layout of snack stores, discount stores, etc. in accordance with the strategy of “regional concentration and complementarity of multiple business formats”. By the end of the first half of 2024, the total number of Yueji Snack Shop stores reached 104.

Risk warning: weak consumption, increased market competition, new business layout falling short of expectations, etc.