Incident: The company released its 2024 interim report. 24H1 achieved revenue of 0.89 billion yuan, +4.9% year on year; of these, 24Q2 achieved revenue of 0.43 billion yuan, +6.1% year on year; of these, 24Q2 achieved revenue of 0.43 billion yuan, +1.7% year on year, and realized net profit to mother 0.025 billion yuan, or -3.4% year on year; the company's performance was slightly lower than market expectations.

Dragged down by the decline in core Big B, the H1 revenue side is under pressure. By product, 24H1 achieved revenue of 3.7/0.17/0.21/0.13 billion yuan for deep-frying, baking/cooking/cooking products, respectively, -4.3%/-8.3%/+32.4%/+19% year-on-year. Among them, deep-fried and baked goods are under pressure, mainly due to increased market competition and a decrease in the company's share of major core customers; the high increase in cooking products is mainly due to the continuous increase in the channel penetration rate of the company's products in the group meal market and the rapid development of the superimposed group meal market; the rapid growth of cooking products is mainly due to the continuous increase in the company's B-side prepared dishes. By channel, 24H1 Company Direct Management (Big B)/

The distribution (small B) channel achieved revenue of 0.41/0.18 billion yuan respectively, +8.5%/+1.8% year over year; Big B's growth rate has slowed. Among them, H1's sales revenue to the top two direct sales customers Yum Sheng/Wallace was 0.19/0.06 billion yuan. The year-on-year difference was -12.6%/-6.6%, mainly affected by the high base of Big B in the same period last year; the small B channel was affected by the lackluster overall social catering demand and the company's cautious participation in price wars, and the H1 growth rate was under pressure. Furthermore, in the first half of the year, the company focused on increasing development efforts for direct lumbar customers. 24H1 had 178 major customers, +21.1% over the same period last year.

The decline in costs led to an increase in gross profit, and profitability remained stable. 24H1's gross margin was 25.2%, +2pp; of these, 24Q2 gross margin was 25%, +2.4pp year over year. The increase in gross margin was mainly due to the continuous improvement in the distribution product structure and the decline in raw material costs such as fats and oils. In terms of cost ratio, 24Q2's sales expense ratio was 5.1%, +0.5pp year on year; mainly due to the company increasing offline channel marketing expenses; 24Q2 management expenses ratio was 10.5%, +1.6pp year on year. Taken together, the company's 24h1/24q2 net interest rates were +0.4pp/+0.3pp to 6.6%/5.8% year-on-year, respectively.

The external environment is under pressure in the short term, and we look forward to subsequent adjustments and improvements. Looking ahead to the second half of the year: 1) On the Big B side, although there are pressures such as a high base and loss of stock share in the short term, the company will continue to strengthen new product development and service efforts for major core customers. At the same time, the company will also actively expand its direct sales customers and continue to increase revenue through category expansion. 2) On the small B side, it is expected that the overall social catering demand will still be under some pressure in the second half of the year, but the company will continue to support key dealers to grow bigger and stronger. On the one hand, empowering dealers to help them improve their management capabilities, and on the other hand, working with dealers to develop new channels such as group meals and breakfast. Currently, the overall group meal market continues to grow relatively rapidly, and is expected to become the growth engine for the Little B channel. In addition, the company is also increasing the promotion of strategic single products through distribution channels and increasing the number of marketing and sales personnel. New products are expected to contribute to the increase as the peak season arrives.

As a leading enterprise in the catering supply chain, the company has formed solid barriers in terms of production capacity and scale effects. As the company continues to explore the needs of the food supply industry and explore emerging opportunities, medium- to long-term performance can be expected.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 1.51 yuan, 1.89 yuan, and 2.28 yuan respectively. The corresponding dynamic PE is 16 times, 13 times, and 11 times, respectively, maintaining the “holding” rating.

Risk warning. New product promotion or failure to meet expectations; risk of large fluctuations in raw material prices; food safety risk.