The company announced 2024H1 results:

24Q2: Revenue 1.429 billion (+43.93%), net profit attributable to mother 0.019 billion (+51.21%), net profit not attributable to mother 0.035 billion (+45.02%).

24H1: Revenue of 5.075 billion (+75.39%), net profit attributable to mother 0.29 billion (+88.57%), net profit not attributable to mother 0.228 billion (+211.79%).

Q2 The results reached the center of forecasting.

Revenue: Douyin's high growth drives online sales

By channel, the company's 24H1 online/offline revenue increased by 80.3%/57.5% year-on-year respectively. Of these, 24Q2 is expected to contribute the main increase from online channels. Among online channels, according to Mama Chan's data, 24Q2's Douyin channel revenue is expected to increase 173% year over year, with monthly sales reaching 0.1 billion (tax included); according to Jiuqian data, 24Q2's traditional e-commerce (Tmall + JD) revenue is expected to increase by more than 25% year on year. The company's “D+N” strategy continues to bear fruit, driving the overall growth of online channels.

Among offline channels, the distribution business contributed the main increase. 24H1 distribution revenue increased by more than 100% year-on-year, mainly due to commercial sales, with a net increase of 130 dealers; community snack stores are still in the climbing stage. 24H1 net opened 60 stores, slightly slower than the company's plan at the beginning of the year (133), and the average monthly revenue of a single 24H1 store reached 0.163 million, which is lower than mature snack stores.

Profit: Supply chain/management efficiency catalyzes profit improvement

The company's 24Q2 gross margin increased by 3.24pct year-on-year to 21.90%. We expect supply chain efficiency mainly due to direct harvesting of nuts from the source+intensive production. In the same period, the company's sales/management rates were -0.06/-1.73 pct, respectively. The main reason was that the company improved management efficiency through the integration of product and sales. Overall, the company's 24Q2 net interest rate increased by 2.54 pct year on year to -1.30%, driving the company to reduce losses.

Investment advice: maintain a “buy”

Our point of view:

The company actively embraces the trend of cost-effective consumption, and the “D+N” strategy is becoming more mature to achieve omni-channel collaborative development. The supply chain efficiency strategy is progressing steadily. With the exception of Wuwei base, Yijiang, Wuqing, and Jianyang bases are all on the agenda. Looking ahead to 24H2, the company's offline distribution and retail sales are expected to accelerate month-on-month after determining a cost-effective approach; although the online channel is facing an increase in base, the high growth potential is still sufficient, and the 10 billion target is safe to be achieved.

Profit forecast: Maintaining the previous profit forecast, the company is expected to achieve total operating income of 10.407/13.891/17.745 billion yuan in 2024-2026, +46.3%/+33.5%/+27.7%; achieve net profit to mother of 0.376/0.58/0.86 billion yuan, +71.0%/+54.4%/+48.3% year over year; PE corresponding to the current stock price is 18.08/11.71/7.90 times, respectively, maintaining the “buy” rating.

Risk warning:

Demand recovery fell short of expectations, market competition intensified, and food safety incidents.