The company released its 2024 mid-year report, reverting the impact of equity incentive payments. The performance was basically in line with expectations: 24H1 achieved revenue of 2.212 billion yuan, down 3.9% year on year; realized net profit of 0.149 billion yuan, down 17.1% year on year; after deducting non-net profit of 0.126 billion yuan, down 23.7% year on year; of these, Q2 single quarter revenue was 1.392 billion yuan, down 6.9% year on year, and net profit to mother was 0.102 billion yuan, down 20.5% year on year After deducting non-net profit of 0.087 billion yuan, a year-on-year decrease of 28.6%. Net profit of 24H1 fell 6.2% year over year after excluding the 19.13 million yuan increase in equity incentive plan payments over the same period last year.

By category: The door wall category continues to grow steadily, and the new category maintains exhibition stores. 1) Cabinet: 24H1 cabinet achieved revenue of 0.966 billion yuan, a year-on-year decrease of 3.7%, of which 24Q2 revenue was 0.65 billion yuan, a year-on-year decrease of 5.1%; cabinet retail was greatly affected by channel diversion, and the company actively promoted large-scale, complete and other channels. 2) Wardrobe: 24H1 wardrobe achieved revenue of 0.928 billion yuan, a year-on-year decrease of 5.9%, of which 24Q2 revenue was 0.545 billion yuan, a year-on-year decrease of 14.0%; at the end of 24Q2, there was a net increase of 143 stores over the end of the year 23, with a net increase of 81 in 24Q2. 3) Wooden door wall panel: 24H1 wooden door wall panel achieved revenue of 0.139 billion yuan, an increase of 6.9% over the previous year. Of this, 24Q2 revenue was 0.094 billion yuan, up 4.8% year over year. There were 1120 stores at the end of 24Q2, a net increase of 137 compared to the end of 23, including a net increase of 74 in 24Q2. The wooden door and wall panel business base is low, and it is still in the dividend period of channel expansion. It uses mature cabinet channels to achieve rapid exhibition stores and maintain steady growth.

Channel division: Large channels continue to expand new customers, overseas growth performance is impressive, and offline retail is under phased pressure. 1) Retail:

The 24H1 distribution channel achieved revenue of 1.166 billion yuan, a year-on-year decrease of 10.9%, of which 24Q2 revenue was 0.709 billion yuan, a year-on-year decrease of 15.9%; 24Q2 was affected by weak consumption power and external environmental pressure such as falling new homes, and distribution channel growth performance was under pressure. The company increased online drainage and empowerment, continued to explore demand for stock renovation in the later stages, expand in multiple categories, and growth is expected to gradually stabilize in the later stages. The 24H1 direct sales channel achieved revenue of 0.175 billion yuan, a year-on-year decrease of 8.2%, of which 24Q2 revenue was 0.078 billion yuan, a year-on-year decrease of 25.7%; the performance weakened slightly due to organizational restructuring in some parts of the 24H1 direct business. 2) Bulk: 24H1 achieved revenue of 0.606 billion yuan, up 8.2% year on year, of which 24Q2 revenue was 0.459 billion yuan, up 7.8% year on year. The company actively optimizes the bulk customer structure and develops industries such as housing, apartments, cultural tourism, hotels, and the elderly. The bulk business has maintained steady growth. 3) Overseas: 24H1 achieved revenue of 0.086 billion yuan, a year-on-year increase of 42.7%, of which 24Q2 revenue was 0.043 billion yuan, an increase of 24.3% year-on-year. The company's overseas bulk business focuses on Australia, North America and other regions, and has set up its own brand dealerships in Southeast Asia. Driven by the dual core of international B and C side business, they go hand in hand to embark on a new journey into the global market.

Supply chain efficiency is exploited, internal cost reduction and efficiency are continuously hedging the impact of price cuts, and increased equity incentive payments have led to higher cost rates.

The company's 24H1 net profit margin was 6.7%, -1.1 pct year on year, of which 24Q2 net interest rate was 7.3%, -1.3 pct year on year. 1) Gross profit margin: The company's 24H1 gross profit margin was 36.7%, -0.1 pct year on year, of which 24Q2 gross profit margin was 36.4%, -0.4 pct year on year.

The price side of 24H1 products competes for market share. The company increased supply chain efficiency, reduced internal costs and improved efficiency, and the 24H1 gross margin remained stable. 2) Period expense ratio: The company's 24H1 expense ratio was 29.4%, +3.4pct year on year, of which the 24Q2 period cost rate was 26.7%, +3.4pct year on year. Looking at the spin-off, the company's 24H1 sales/management/R&D/finance expense ratios were 16.9%/6.8%/5.9%/-0.1%, respectively, with year-on-year changes of +1.8pct/+1.2pct/+0.1pct/+0.2pct; of these, 24Q2 company's sales/management/R&D/finance expense ratios were 15.7%/5.5%/5.3%/0.1%, respectively, with year-on-year changes of +2.0pct/+0.9pct/-0.2pct. The increase in the company's management expense ratio is mainly affected by the increase in equity incentive payments; due to the pre-investment of the company's marketing and promotion expenses, the sales expense ratio has increased, and 24H2 is expected to strengthen control. According to revenue side investment, the cost rate pressure is expected to ease.

The company's rolling equity incentives bind core employees, and are consistent; expand and open multiple categories, continue to optimize individual stores, and continue to advance overall and package strategies; scale effects drive increased profits and highlight Alpha capabilities; direct management attacks the Southern Market and gradually establishes a national brand image; and overseas B-side and C-side businesses are dual-core driven to embark on a new journey of globalization. Considering weak spending power, the company's equity incentive payments were lowered to 0.564/0.623/0.686 billion yuan (previous value: 0.673/0.741/0.83 billion yuan), which was -5.3%/+10.5%/+10.1%, respectively, corresponding to 2024-2026 PE being 7X/7X/6X, respectively, maintaining the “buy” rating.

Risk warning: Terminal demand is recovering slowly, and competition for large channels is intensifying.