Incident: The company released its 2024 interim report. 24H1 achieved operating income of 1.52 billion yuan, +0.9% net profit to mother of 0.07 billion yuan, or -9.1% year-on-year. Its 2402 achieved revenue of 0.88 billion yuan, or 5.6% year-on-year; net profit to mother was 0.03 billion yuan, which stabilized its core business under a weak economy of -24.4% compared to the same period last year. By product, the company's 24H1 overall cabinet/overall closet/wooden door business achieved revenue of 9.5/0.42/0.09/0.02 billion yuan respectively, +0.1%/0.7%/+3.0%/+75.7% year-on-year respectively. Under the weak state of the industry, the company's overall revenue from the cabinet and wardrobe business remained stable, and technical and other businesses grew at a low base.

The retail business is under pressure, and Tianzong and overseas businesses are performing well. By channel, the company's 23H1 direct operation/distribution business/overseas/other business achieved revenue of 6.8/0.1/0.6/0.17/0.02 billion yuan respectively, -12.3%/-72.4%/+15.1%/33.8%/131.1% year-on-year respectively. The retail business was phased under pressure due to the decline in industry sentiment (24H1 revenue -15% YoY to 0.69 billion yuan), and there were internal adjustments (redistribution of some direct-run stores). The bulk business grew steadily and showed resilience. The number of high-quality real estate contracts was steadily increasing, and categories such as kitchen appliances relied on the company's brand resource advantages to be collected in hardcover. The company's bulk business achieved positive resilient growth in the first half of the year. Overseas business has performed well. In the future, the Thai manufacturing base will be the core and a satellite factory will be set up in the regional market to shorten the delivery radius and reduce delivery costs.

The store structure continues to be optimized, and the channel layout is continuously confirmed. The number of 24H1 gold cabinet, gold medal cabinet, gold medal wooden door/ finished hall/balcony bathroom/maneo stores was 1664/1141/667/178/96/163 respectively, a net increase of -38/-22/-14/+20/+6/+12 compared to 24Q1, respectively, and the store structure continued to be optimized. During the reporting period, the company further deepened the Big Retail 140 strategy and strengthened the channel layout.

Profitability remains stable. 24H1's gross profit margin was 26.7%, -1.6 pct year on year; management expense ratio and sales expense ratio were 6.0%/11.7%, respectively, +0.5/-1.6 pct year on year. Financial expenses were +148% compared to the same period. This is an increase in cost-based interest expenses due to the completion and consolidation of the convertible bond raising project issued by the company in 2023. 24H's net profit margin was 4.6%, -0.5pct year on year; of these, single 24Q2 net profit margin was 3.8%, -0.9pct year on year. Investment advice: The company continues to deepen its all-category and omni-channel strategic layout. The category expansion performance is outstanding, and the channel strength continues to increase. Considering the downward pressure on real estate, the company's 24-26 profit forecast was adjusted to 0.29/0.33/0.37 billion yuan, +0.4%/12%/12% year-on-year; PE corresponding to the closing price of 16.5 yuan on August 30 was 9/8/7 × maintaining a “recommended” rating, respectively.

Risk warning: the risk of large fluctuations in raw material prices, the risk of consumer demand recovery falling short of expectations, and the risk of increased market competition.