The company released its 2024 semi-annual report: In the first half of 2024, the company achieved operating income of 0.812 billion yuan, a year-on-year increase of 29.31%, net profit to mother of 95.19 million yuan, an increase of 111.71% year-on-year, and net profit after deducting 82.31 million yuan, an increase of 89.97% year-on-year. Among them, 2024Q2 achieved operating income of 0.429 billion yuan, a year-on-year increase of 24.47%, net profit to mother of 52.92 million yuan, an increase of 12.08% year-on-year, and net profit of 46.72 million yuan after deduction, or -2.59% year-on-year.

The company's various businesses grew steadily, and cost reduction and efficiency continued to advance. In the first half of 2024, the company's pet disposable hygiene products business/non-woven business/personal disposable hygiene products business had revenue of 763.19/37.57/10.41 million yuan respectively, an increase of 29.07%/32.98%/38.60% over the previous year. New customers have continued to contribute revenue since the second quarter. As orders grew, the company's capacity utilization rate increased dramatically, the purchase price of superimposed raw materials was relatively stable, and overall operating costs remained stable. At the same time, the company itself continues to strengthen internal controls, reduce operating costs, and significantly improve overall profitability.

Domestic and overseas sales grew at the same time, and a customer resource system was gradually formed. In the first half of 2024, the company achieved revenue of 53.7 million/0.759 billion yuan at home and abroad, respectively, an increase of 28.71%/29.35% over the previous year. At present, the company has formed a customer resource system based on many large supermarkets, pet products franchise brands and e-commerce platforms in the US, Europe, and Japan. The supplier entry threshold for these customers is extremely high. Through multi-dimensional hierarchical screening, the company stands out from many production and service providers, and has even become an exclusive manufacturer supplier for some well-known multinational companies. The above customers have stable market channels, high supply requirements, and fast market space growth. With the advantages of large-scale production capacity, excellent product quality, and strong comprehensive production management capabilities, etc., the company has won long-term recognition from these customers and has built a stable and lasting cooperative relationship with the customer.

The company's gross margin has remained stable, and expenses have declined. 2024Q2's net profit margin to mother was 12.35%, -1.27pct year on year; gross profit margin was 19.47%%, up 0.89pct year on year. On the cost side, 2024Q2's sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio reached 1.75%, 2.79%, 1.52%, and -1.13%, respectively, compared with -0.16pct, -0.15pct, -0.16pct, and +6.27pct, respectively. The increase in the financial expense ratio was mainly due to the stable exchange rate of the US dollar against the RMB, which had less impact on exchange earnings compared to the same period last year.

Profit forecast and rating: We expect the company's net profit for 2024-2026 to be 0.169, 0.199, and 0.228 billion yuan, respectively, +63.2%, +18.0%, and +14.9% compared to the same period. The current closing price corresponds to the 2024-2025 PE is 14 or 11 times. As a leading enterprise in the nursing field, the company is rated 24 to 25 times PE in 2024, corresponding to a reasonable value range of 21.87 to 22.78 yuan.

Risk warning: Raw material prices fell short of expectations, market competition intensified, and downstream customer orders fell short of expectations.