Core view: Due to the excellent performance of overall daily sales, 2024H1's adjusted net profit to mother exceeded market expectations. We expect that the rapid expansion of stores, increased consumer frequency, and strong performance in new markets will increase the company's overall profit margin level every quarter. On the marginal side, the company will return to Hong Kong Stock Connect in September, and it is recommended to take an active layout.

Raise profit forecasts and maintain a “buy” rating. Due to overall daily sales growth exceeding expectations and the headquarters's good cost control, we raised our profit forecast. The company's adjusted net profit for 24-26 is 0.1/0.13/0.27 billion yuan, respectively. (The previous forecast for 23-25 was 0.04/0.1/0.26 billion yuan), and the adjusted net profit growth rate for 25-26 was 31%/108%. We expect the company's same-store growth trend to continue in the second half of the year, and profit margins are expected to continue to rise as stores expand and daily sales increase, maintaining a “buy” rating.

24H1's results slightly exceeded the previous profit announcement. The company achieved 24H1 revenue of 2.04 billion yuan, a year-on-year increase of 48%, and adjusted net profit of 0.051 billion yuan, which reversed the year-on-year loss. The adjusted net interest rate was 2.5%. With a year-on-year increase of 3.8 pct and a month-on-month increase of 0.9 pct, profit margins maintained an upward trend.

The same store bucked the trend, and the overall order volume increased by double digits. In 24H1, the company's same-store growth rate was 3.6%. Under heavy pressure from the external environment in the first half of the year, it still maintained a good growth rate. Overall, the company's single-store daily sales reached 0.0135 million in the first half of the year, up 10.1% year on year. Among them, the customer unit price fell 4.6%, mainly affected by the decline in the share of overall takeout orders due to new market stores not yet opening takeout. The 15.4% increase in order volume is mainly due to increased consumer frequency and high potential points in new markets leading to higher basic sales.

24H1 store-side operating margins continue to rise, and headquarters expenses continue to be thinned. 2024H1, the company's store-side operating margin reached 14.5%, an increase of 1.0 pct over the previous year. With the expansion of stores, the annual headquarters expense ratio (all items other than store-side expenses and taxes, excluding non-current items) was 10.5%, down 2.9 pcts year on year. Among them, the cost of human cash compensation at the company level was 5.5%, down 1.9 pct year on year, financial costs were 1.4%, down 0.8 pct year on year, and amortization of intangible assets at the headquarters was 1.3%, down 0.5 pct year on year.

The current value is undervalued, and the focus is on “pass-through” opportunities. The market has always had doubts about the stability of the company's operations. In the first half of the year, against the backdrop of a poor macro environment, strong store performance once again proved the resilience of the company's operations. We believe that what is behind this is that the company has unique advantages in terms of products and operations. We expect that the expansion of stores and the increase in daily sales will continue to increase profit margin performance quarterly. Currently, due to liquidity, the company's internal value is undervalued. On the marginal side, the company is expected to return to Hong Kong Stock Connect in September. At that time, improved liquidity is expected to drive the company's value back.

Risk warning events: Daily store sales recovery fell short of expectations; store expansion fell short of expectations.