Event: The company publishes its 2024 semi-annual report. In 2024H1, the company achieved operating income of 6.976 billion yuan, -2.35% YoY; realized net profit to mother 0.609 billion yuan, +4.26% YoY. Net profit after deducting non-return to mother was 0.557 billion yuan, +10.18% YoY. Looking at a single quarter, 2024Q2 achieved revenue of 3.502 billion yuan, -10.39% year over year; net profit to mother 0.311 billion yuan, +20.67% year over year; net profit without return to mother 0.271 billion yuan, +23.07% year over year.

Export sales are growing faster than domestic sales. 1) By brand: The 24H1 Covos/Tianke brand achieved revenue of 3.397/3.359 billion yuan respectively, -3.07%/+2.42% year-on-year, accounting for 48.69%/48.15% of total revenue.

2) Subregions: 24H1 domestic and overseas sales achieved revenue of 4.131/2.845 billion yuan respectively, -9.6%/+10.5% year-on-year, accounting for 59.2%/40.8% of total revenue. The gross margin of domestic and overseas sales was 46.1%/53.5%, respectively. 3) Channel division: 24H1 online/offline achieved revenue of 4.346/2.629 billion yuan respectively, -2.7%/+13.5% year-on-year, accounting for 62.3%/37.7% of total revenue, and online/offline gross margin of 55.2%/39.0%, respectively.

The level of profitability has increased. 1) Gross profit margin: 24H1/24Q2 +0.15pct/+3.48pct to 49.12%/51.05% year-on-year. 2) Rate side: 24H1 Sales/Management/R&D/Finance Rate YoY -2.87pct/-0.18pct/+0.93pct to 29.27%/3.69%/6.39%/-0.30%; 24Q2 Sales/Management/ R&D/ Finance Rate YoY -3.64pct/+0.78pct/+1.25pct/+1.13pct to 30.85%/4.01%/6.44%/-1.13%. 3) Net interest rate: Overall, the company's 24H1/24Q2 net margin was +0.56pct/+2.29pct to 8.73%/8.89% year-on-year.

Profit forecasting and investment advice. We expect the company's net profit to be 1.41/1.7/1.96 billion yuan in 2024-2026, respectively, +130.5%/+20.4%/+15.1% year-on-year, maintaining the “gain” rating.

Risk warning: Consumption recovery falls short of expectations, industry competition intensifies, and channel development falls short of expectations.