Incident: The company released its 24-year report, and 24H1 achieved revenue/net profit attributable to mothers/net profit after deduction of 3.34/0.3/0.28 billion yuan, -9.7%/+22.2%/24.2% year-on-year. Corresponding to 24Q2, achieved revenue/net profit attributable to mothers/net profit excluding non-attributable net profit of 1.64/0.13/0.13 billion yuan, or -12.4%/25.1%/36.6% year-on-year.

Comment:

Single stores are under pressure for a short period of time, and the core focus is on boosting the effect of single stores. As of 24H1, the number of company stores was 14,969, and 24H1 closed 981 stores. The average 24H1 store was 0.169 million yuan/home (calculated based on current fresh goods revenue/ (number of stores at the beginning of the period+number of stores at the end of the period) *2), a year-on-year decrease of about 11%, mainly due to the impact of the consumption environment. Facing the new consumption environment, the company actively adjusts strategic decisions, strengthens brand building and the layout of online consumption scenarios with franchisees' profits as the core, and looks ahead, focusing on boosting the company's single store.

Low costs, increased gross margins, and the supply chain continued to reduce costs and increase efficiency. The 24Q2 company's gross margin/net profit margin was 30.6%/8.0%, +8.2 pct/+2.4 pct year over year, respectively. The year-on-year increase in gross margin was mainly due to the current low price of duck side raw materials. Looking back, the main downstream raw materials are in the halide products industry and restaurants, etc., and the current downstream consumption boom is relatively low. We do not expect the overall raw material price to rise significantly in the second half of the year, and gross margin is expected to rise steadily. 24Q2 The company's sales expense rate/management expense ratio was 10.0%/7.0%, compared with +2.6 pct/0.2 pct. The increase in sales expenses was mainly due to an increase in advertising and consulting expenses, and the overall management expense ratio was stable. 24H1's investment income was -3.25 million yuan, and the loss margin was small. The company continues to optimize supply chain efficiency, operate steadily, and overall profitability is expected to increase steadily.

Mid-term dividends strengthen shareholder returns and correspond to higher dividend rates. The company announced a mid-term dividend plan, with a cash dividend of 0.30 yuan (tax included) per share. The current stock price corresponds to a half-year dividend rate (linear extrapolated annualized dividend rate of about 4-5%) to enhance shareholder returns.

Profit forecast and investment rating: Affected by the consumer environment, the company's single stores and number of stores are under pressure in the short term. The company is currently actively making adjustments and looking ahead. The core focus is on the emergence of a marginal inflection point for the company's single store. Second, the company community accounts for a high proportion of stores along the street, and business stability is relatively good when the consumption boom is low. As a leading company in the recreational halide products circuit, the company has leading management, steady operation, and is expected to maintain relatively good profitability. We expect earnings per share for 24-26 to be 1.09, 1.24, and 1.38 yuan/share, respectively, maintaining the company's “buy” rating.

Risk factors: Consumption recovery falls short of expectations, single store recovery falls short of expectations, rising raw material prices, food safety issues.