occurrences

With 2024H1, the company achieved revenue of 8.386 billion, +10.45% YoY, net profit 2.239 billion, +22.88% YoY, net profit 1.903 billion, +14.27% YoY; of these, in 2024Q2, the company achieved revenue of 4.583 billion, +7.64% YoY, net profit 1.309 billion YoY, +20.58%, net profit 1.085 billion YoY, +6.40% YoY.

The basic converter disk is stable, and the new business provides incremental growth

Against the backdrop of pressure from the real estate and consumption environment, the company's Q2 revenue was +8% year-on-year. Despite the narrowing growth rate, steady growth is already quite valuable. H1 revenue was +11% year-on-year, and the converter category business was +5% year-on-year. The growth rate of Q2 and Q1 is expected to be similar; the company launched electric tools domestically in the first half of the year, which is expected to make a certain incremental contribution. H1 revenue from the smart electrical lighting business was +12% year over year. Considering the high correlation between this business and real estate, it is reasonable that Q2 growth will slow down, but growth is still expected to be steady. The new energy business maintained a high growth rate of +120% to 0.29 billion compared to the same period last year, accounting for 3%.

Q2 Gross margin is still improving, and the increase in wealth management income is outstanding

Q2 gross margin was still +0.4 pct compared to the same period; through hedging and other methods, the company's history showed a strong ability to lock in prices for raw materials, and there was no significant cost disturbance in this round. The gross margin continued to improve against the backdrop of a high base during the same period, and the performance was outstanding. On the cost side, the company is actively developing new categories. It maintained a large investment in Q2, and the sales/management/R&D expense ratios were +1.1/+0.1/+0.7 pct, respectively, similar to the Q1 trend. Q2 Net income from investment (bank financial management) contributed 4.0pct to net interest rate. Overall, the Q2 company's gross margin improved slightly, and expenses maintained a large investment. Combined with a large contribution from wealth management income, attributed/deducted non-net interest rates were +3.1/-0.3 pct year on year, respectively, and the profit performance was excellent.

Shippeng Zhigengcao's contrarian growth highlights strong management strength

Since 2022, when the real estate environment weakened, the company's quarterly revenue growth rate has never fallen below 7%, and has been in double digits for most of the time; steady revenue growth, on the one hand, due to the stability of the cornerstone business — stable demand for converters; on the other hand, the company's strong operating strength, which maintains efficient promotion of traditional categories and explores consumer demand; in addition, it continues to expand the growth of new categories; and actively adjusts the channel side to maintain efficiency and further expansion. Profit side performance was better, and cost reductions such as digitalization have contributed to the increase in gross margin/net margin for 7 consecutive quarters since 2022/Q4.

Outstanding management strength, maintaining the company's “buy” rating

Bull Group has strong operating strength and is still expected to achieve steady growth in the context of a weak environment; the company's 2024-2026 revenue is expected to be 17.3/19.3/21.5 billion, respectively, +10%/+12%; net profit to mother is 4 0.5/4.9/5.6 billion, respectively, +16%/+10%/+13% year over year, corresponding to PE 20/18/16X, respectively, to maintain the purchase rating.

Risk warning: 1. Demand pressure due to the decline in real estate exceeded expectations; 2. New business development fell short of expectations.