Q2 The company's revenue/net profit to mother was +10.29%/-46.75%, respectively. Revenue growth was mainly due to continued B-side business growth, and C-side demand improved month-on-month. Profit pressure was mainly affected by the high base of asset disposal earnings for the same period last year, and increased C-side investment. According to H2, the company's B-side is expected to continue its growth trend as demand recovers, and at the same time continue to cooperate with new customers, bringing growth beyond expectations. At the same time, it is recommended to pay more attention to the recovery of C-side demand and channel expansion, extending from online to offline, and opening up the growth ceiling.

The profit side is affected by market competition, and pressure may continue. The company's BC two-wheel drive is steadily expanding and consolidating its advantages. The C-side business continues to explore incremental border contributions, and the development path is clear. We give 24-25 EPS predictions of 0.59 and 0.75 yuan, corresponding to the 24-25 19X valuation, and maintain the “gain” rating.

24Q2 revenue/net profit to mother were +10.29%/-46.75%, respectively. The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.273 billion yuan, +12.89% year over year, net profit to mother 0.108 billion yuan, or -34.6% year over year. Affected by the high return on one-time asset disposal in the same period last year, the non-net profit was deducted 0.099 billion yuan, or -10.87% year over year. Among them, single Q2 achieved revenue of 0.649 billion yuan, +10.29% YoY, net profit to mother 0.048 billion yuan, 46.75% YoY, and deducted non-net profit of 0.047 billion yuan, or -14.79% YoY. Q2 The company's cash repayment was 0.737 billion, +21.77% year over year, faster than revenue growth. Contract debt was 0.027 billion, up 121.47% year on year, and net operating cash flow was 0.099 billion, up 102.75% year on year, mainly due to increased revenue scale and timely payment settlement. In addition, the company implemented a mid-term dividend and paid a cash dividend of 60 million yuan, with a dividend rate of 55.3%.

The B-side continues to grow steadily, and the C-side growth rate continues to pick up. 1) By business: The Q2 complex, light cooking/beverage and dessert ingredients business achieved revenue of 0.301/0.291/0.04 billion yuan respectively, +10.10%/+11.79%/+3.04% compared with the same period last year. Among them, since the complex, drink and dessert ingredients business mainly targets B-side customers, the year-on-year increase was mainly due to stable cooperation with major customers, and the basic market market is stable. The growth in the light cooking business was mainly due to the low base+empty pasta Disney IP joint brand contribution during the same period last year. The company increased its promotional activities for the C-side business. While revenue increased, profit pressure also increased accordingly. 2) By region: The Q2 core East China region was +16.57% year-on-year, accounting for 81% of the overall business. The growth rate was faster than the overall, mainly due to idle performance on the C-side. North China/South China had a high base of -25.23%/-14.11% YoY, while Central China/ Northeast China/ Southwest/ Northwest/ Overseas business revenue was +1.40%/+3.60%/+46.28%/+76.84%/+9.36%, respectively. The number of dealers was 445, an increase of 58 over Q1.

Gross margin declined, and net profit declined under a high base. The company's 23Q2 gross profit margin was 32.1%, -2.4 pct year over year, mainly due to the impact of product structure and the increase in C-side promotional giveaways. The sales expense ratio was 15.06%, +0.17pcts year on year, and the gross sales margin decreased by 2.6 pcts year over year. The management fee rate was 2.49%, -1.38pcts year-on-year.

The net interest rate for Q2 was 7.35%, which was -7.86pcts year-on-year, mainly due to the high return on one-time asset disposal in the same period last year.

H2 outlook: Demand on the B side is steady, and on the C side, profits are expected to improve. The company's revenue growth in the first half of the year was due to the continued boom in B-side business growth. C-side companies combined investment and innovation to return to a growth trajectory. Profit pressure was mainly affected by the high base of asset disposal earnings for the same period last year. Looking at the second half of the year, demand for B-side catering is expected to continue to improve. The company's B-side is deeply tied to major customers, and the complex distribution and beverage and dessert ingredients business will benefit from increased demand from major downstream customers and the expansion of new customers, and revenue growth is expected to continue to be strong. The C-side will host important shopping festivals such as Double Eleven in the second half of the year. The company expects to continue to launch new products and continue a relatively high investment pace. The revenue side is expected to accelerate growth, and profitability is expected to improve.

Investment advice: C-side business growth is picking up, profits are under pressure from a high base, and maintaining the “gain” rating. The Q2 company's revenue/net profit to mother was +10.29%/-46.75%, respectively. Revenue growth was mainly due to continued B-side business growth, and C-side demand improved month-on-month. Profit pressure was mainly affected by the high base of asset disposal earnings for the same period last year, and increased C-side investment. According to H2, the company's B-side is expected to continue its growth trend as demand recovers, while continuing to cooperate with new customers, bringing growth beyond expectations. At the same time, it is recommended to pay more attention to the recovery of C-side demand and channel expansion, extending from online to offline, and opening up the growth ceiling. The profit side is affected by market competition, and the pressure may continue. The company's BC two-wheel drive is steadily expanding and consolidating its advantages. The C-side business continues to explore incremental border contributions, and the development path is clear. We give 24-25 EPS predictions of 0.59 and 0.75 yuan, corresponding to the 24-25 19X valuation, and maintain the “gain” rating.

Risk warning: demand recovery falls short of expectations, loss of major customers, customer growth falls short of expectations