The company achieved operating income of 1.388 billion yuan in the first half of 2024, up 1.72% year on year; net profit to mother of 53.3213 million yuan, up 43.46% year on year; net profit after deducting 50.0646 million yuan, up 106.72% year on year; basic EPS was 0.177 yuan/share, up 43.9% year on year; weighted average ROE was 7.29%, up 0.44pct year on year.

24H1 revenue grew steadily and profitability improved significantly. With 2024H1, the company achieved operating income of 1.388 billion yuan, a year-on-year increase of 1.72%, and achieved net profit of 53.3213 million yuan, a year-on-year increase of 43.46%, after deducting non-return net profit of 50.0646 million yuan, an increase of 106.72% over the previous year; the weighted average ROE was 7.29%, an increase of 0.44pct year-on-year. In the 24Q2 quarter, the company's revenue was 0.863 billion yuan, up 4.12% year on year. Net profit to mother was 41.0556 million yuan, an increase of 41.36% year on year. After deducting non-return net profit of 39.9969 million yuan, an increase of 81.23% year on year. By business, 2024H1 home decoration finishing materials/automotive interior finishing materials/film/artificial leather/building fireproof veneer materials achieved revenue of 0.124 billion yuan/0.225 billion/ 0.238 billion/ 0.027 billion/ 0.104 billion yuan, compared with +10.07%/+12.21%/+32.62%/-34.75%/-19.84%, respectively.

Gross margin declined slightly, net profit margin increased, and cost control was effective. 2024H1 achieved a gross profit margin of 21.98%, a year-on-year decrease of 0.42pct, a net sales margin of 4.57%, and a year-on-year increase of 0.95pct. The decline in gross margin was mainly affected by increased market competition and falling product prices. Looking at the product price side, the average price of 24H1's home decoration finishing materials/automotive interior finishing materials/film/artificial leather/building fireproof veneer materials was -2.34%/-3.73%/-2.21%/+1.03%/+0.24% year-on-year; from the cost side, the average 24H1 price of resin powder/plasticizer/surface agent/kraft paper/decorative paper was -6.73%/+6.68%/-0.36%/+3.28%/+3.28%/+3.28%/+3.28%/+3.28%/+3.28%/+3.28%/+3.28%/+1.28%/+3.28%/+3.28%/+1.28%/+3.28%/+1.28%/+3.28%/+1.28%/+3.28%/+1.28%/+3.28%/+1.28%. The 2024H1 company's expense ratio for the period was 15.97%, down 2.19pct year on year. Among them, finance/management/sales/R&D was 0.86%/5.44%/6.40%/3.27%, -0.85pct/-0.01pct/-0.26pct/-1.07pct year-on-year. The net cash flow from 24H1 operating activities was $0.109 billion, a year-on-year decrease of 45.68%, mainly due to increased payment of supplier notes and employee remuneration due during the reporting period.

New and old businesses go hand in hand, and the competitive advantage is remarkable. At the industry level, 1) The real estate industry declined, and demand in the building ceramics market shrank. National ceramic tile production continued its downward trend in 2023, at 6.73 billion square meters, a year-on-year decrease of 8%. 2) In 2023, the production and sales volume of new energy vehicles reached 9.587 million units/9.495 million vehicles respectively, increasing 35.8%/37.9% year-on-year respectively, driving demand for automotive interior finishing materials. 3) The home improvement industry has moved to the stock market, and green and intelligent have become new trends; one-stop assembly services and prefabricated buildings have become the development direction of the home improvement industry. At the company level, 1) Eagle Brand has high brand awareness and extensive sales channels and customer resources. Through the decline in dealer channels and an asset-light operating model, sales volume has bucked the trend. 2) The company is deeply involved in automotive interior materials, has strong technical and market competitiveness, and actively lays out the field of new energy vehicles; increases research and development of high-value-added film products to meet the market demand for personalized car modifications. 3) The company develops environmentally friendly and healthy home decoration materials; builds a pan-home ecosystem, integrates the product/brand/channel resources of “Ruixin” and “Eagle Brand” with the construction service capabilities of “Tianhui Construction Technology”, and uses integrated prefabricated decoration technology to achieve rapid environmentally friendly delivery.

The Pan-Home Furnishing Strategy promotes a closed loop in the industrial chain and maintains a “gain” rating. In July 2024, the company acquired 51% of the shares of Southern Design Institute to reinforce the company's business capabilities in the field of architectural design and interior decoration design in the public decoration industry and further promote a closed loop in the industrial chain. Currently, the company is based on the two major businesses of architectural ceramics and polymer composite finishing materials, driving product sales around the pan-home furnishing industry chain; Yingpai Ceramics is promoting market decline, leveraging an asset-light operating model, reducing costs and improving efficiency, improving the central warehouse model, strengthening radiation terminal channels to improve the coverage capacity and rapid response of county administrative districts, accelerate the expansion of the national market, and reach terminal outlets. Considering continued competition in the industry, we slightly lowered our profit forecast. We expect the company's EPS for 2024-2025 to be 0.50 yuan and 0.61 yuan, respectively, and the corresponding PE will be 12.0 times and 9.7 times, respectively, maintaining the “increase” investment rating.

Risk warning: The growth rate of real estate and infrastructure investment has declined sharply, the price of raw materials has risen sharply, the expansion of new business and new markets falls short of expectations, the risk of increased price competition in the ceramic tile industry, and the risk of impairment of goodwill in newly acquired assets.