Key points of investment

Event: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 3.21 billion yuan, -4.35% YoY; net profit to mother 4.89 million yuan, or -62.02% YoY. Among them, Q2 achieved revenue of 1.844 billion yuan, or -7.86% YoY; net profit to mother was 50.76 million yuan, or -26.36% YoY.

Engineering customization products have increased, and door and window hardware and accessories have declined a lot. By product, 24H1's door and window hardware systems/household products/other building hardware/door and window components/point support glass curtain wall components/ door control hardware/ stainless steel fence components revenue was -16.04%/+13.67%/+16.59%/-18.78%/+18.78%/+18.15%/-6.16%/+20.15%, respectively. The main subsidiaries of 24H1 Company, Jianyijia/Haybase/Jianlang Precision achieved revenue of 0.124/0.078/0.199 billion yuan respectively, +8.64%/-48.96%/+12.99% year-on-year respectively. Despite weak market demand, the company actively develops new scenarios and opens up new markets, and the decline in 24H1 revenue is far less than the extent of the decline in the industry.

The gross margin was basically the same year over year, and sales expenses were slightly diluted. 2024H1's gross sales margin was 31.27%, a year-on-year change of +0.08pct. By product, the gross margin of 2024H1's door and window hardware systems/household products/other construction hardware products was 39.94%/29.22%/16.65%, respectively, with year-on-year changes of +0.58/-1.15/+1.23pct. In terms of the cost ratio for the period, 2024H1's sales/management/R&D/finance expense ratios changed year-on-year by -0.54/+0.47/+0.36/+0.09pct, respectively. Additionally, the company accrued credit impairment losses of 83.22 million yuan in 2024H1 (51.17 million yuan in the same period last year).

Operating cash flow increased year-on-year due to reduced cash payments. Net cash flow from 2024H1's operating activities - $0.19 billion, +55.65% year over year, mainly due to a decrease in the company's 24H1 cash payments. 1) Payout ratio: 2024H1 company's revenue ratio was 90.28%, year-on-year change -20.29pct; 2) Payout ratio:

The 2024H1 company's pay-as-you-go ratio was 80.65%, a year-on-year change of 38.93pct.

Profit prediction and investment rating: After a long period of exploration and continuous iteration, Jianlang has formed an efficient sales model for multi-category products and scattered small B customers. During the downturn in the industry, the company stuck to cash flow, upgraded service capabilities, and iterated sales models. Considering the slow recovery in market demand, we lowered the company's 2024-2026 net profit forecast to 0.274/0.379/0.482 billion yuan (previous value was 0.503/0.659/0.774 billion yuan), and the corresponding PE was 26X/19X/15X, respectively. Considering the company's future performance resilience and room for improving human efficiency, we maintained a “buy” rating.

Risk warning: the risk that downstream demand falls short of expectations; the risk of large fluctuations in raw material prices; the risk of mergers and acquisitions; the risk of new category development falling short of expectations.