The company released its 2024 semi-annual report: 2024H1 achieved revenue of 2.212 billion yuan (-3.9% YoY), net profit of 0.149 billion yuan (-17.1% YoY, -6.2% YoY after excluding 0.019 billion yuan of equity incentive payments); Single Q2 achieved revenue of 1.392 billion yuan (-6.9% YoY), net profit of 0.102 billion yuan (YoY -20.5%), expected to exclude equity incentive payment fees The decline narrowed after the impact). Affected by weak real estate and consumer demand, Q2 revenue remained stable and profits were under pressure.

Kitchen cabinets are stable, wardrobes are under pressure, wooden doors and other categories are increasing. 24H1 kitchen cabinets/closet/wooden doors/other revenues were 9.66/0.928/0.139/0.178 billion yuan (-3.7%/-5.9%/+6.9%/-1.2%), and single Q2 was -5.1%/-14.0%/+4.8%, respectively. The performance of kitchen cabinets was basically stable, wardrobes were under pressure in the short term, and the wooden wall business grew well. The gross margins of 24H1 kitchen cabinet/ wardrobe/ wooden door/ other were 38.8%/40.9%/17.2%/18.9% ((-0.5/+1.8/-0.7/-5.9pct), and the gross margin for single Q2 was 37.4%/40.7%/18.5%/23.0% (+1.5/-0.3/-4.2pct), the gross margin of the core category kitchen cabinet was repaired year on year, and the gross margin of the wooden door gradually improved with the scale effect.

Retail sales are under pressure, bulk is growing steadily, and going overseas is speeding up.

The company's channels are diversified. 24H1 distribution/direct operation/bulk revenue was 1.166/0.175/0.606 billion yuan (-10.9%/-8.2%/+8.2% YoY), retail revenue -10.6% YoY; Single Q2 -15.9%/-25.7%/+7.8% YoY, retail revenue -17.0% YoY, affected by weak real estate and consumer demand, retail performance was under pressure. The bulk customer structure was optimized, and non-real estate projects were actively expanded to achieve good growth. By the end of 24Q2, the company had 1798/1993/1120/20 stores selling kitchen cabinets/closets/wooden doors/direct-run stores respectively (+39/+81/+74/-5 at the end of 24Q1), adding a total of 189, and continued to expand.

On the overseas side, 24H1 achieved overseas revenue of 0.086 billion yuan (+42.7% YoY), with impressive year-on-year growth. 24H1 gross margin was 25.2% (+10.8pct year over year), single Q2 gross profit margin was 26.2%, profitability continued to improve. B-side and C-side businesses were driven by dual core drivers and went hand in hand. In 2023, the company released a global brand strategy to increase brand retail franchise business development in Southeast Asian countries. In June 23, the largest Zhibang flagship store in Southeast Asia opened in Singapore Kitchen, clothing, wood, and clothing were purchased in one stop. Since then, more and more overseas retail stores have successively landed in Cambodia, the Philippines, Myanmar, the Maldives, Malaysia, Indonesia, Kuwait, Japan, etc., and the brand went overseas faster.

Stable profit level & operating capacity. The 24Q2 company's gross margin was 36.4% (-0.4pct year on year), 7.3% net profit margin (YoY -1.3 pct), and the sales/management/R&D expenses ratio was 15.7%/5.5%/5.3% (+2.0/+0.9/-0.2pct), respectively. The net operating cash flow for 24Q2 was $0.317 billion (-$0.128 billion). In terms of operating capacity, as of 24Q2, the company's inventory turnover days was 176 days (+23 days year over year), the number of accounts receivable turnover days was 22 days (+6 days year over year), and the number of accounts payable turnover days was 74 days (+8 days year over year).

Profit forecast and investment rating: Net profit due to mother for 2024-2026 is expected to be 0.57 billion yuan, 0.62 billion yuan, and 0.68 billion yuan, respectively. The corresponding PE is 7.5X, 6.9X, and 6.3X, respectively, maintaining a “buy” rating.

Risk warning: Competition in the industry has intensified, the decline in real estate has exceeded expectations, and the price of raw materials has risen above expectations.