Incident Overview: 2024H1 revenue 1.9 billion yuan/ +10.3%, net profit to mother 0.058 billion yuan/ -26.98%, deducted non-net profit 0.05 billion yuan/ -30.99%, of which 24Q2 revenue was 0.9 billion yuan/ +10.6%, and net profit to mother was -12.33 million yuan, which turned into a year-on-year loss.

Business performance: The growth of fast food products is under pressure, the performance of distribution channels is superior to direct sales channels, and growth outside the province is leading the province.

1) By product, food/catering revenue for the first half of 2024 was 1.142/0.72 billion yuan, respectively, +8.23%/+14.62%, respectively. Mooncakes/frozen in the food business were 0.03/0.54 billion yuan, respectively, +7.14%/-0.51%.

2) By channel, direct sales/distribution channel revenue in the first half of 2024 was 0.341/0.801 billion yuan, +2.96%/+10.64%, respectively. There was a net increase of 6 restaurants in the first half of 2024, including a net increase of 1/1 for restaurants in the first half of 2024. 24H1 added a total of 9 dealers and agents to expand the product market and accelerate the release of performance.

3) By region, Guangdong Province's revenue in the first half of 2024 was 0.848/0.263/0.032 billion yuan respectively, +5.38%/+16.09%/+29.01%, respectively.

Cost and expense side: Food discounts and the opening of new restaurants dragged down gross profit margins, and the overall cost rate declined slightly during the period. 1) In terms of cost, gross margin for the first half of 2024 was 25.86%, down 3 pcts year on year, and gross margin of the food and catering business declined; 2) In terms of expenses, the company's sales/management/R&D/finance expense ratios for the first half of 2024 were 10.74%/9.65%/1.98%/-0.1%, respectively, with a year-on-year change of -0.35pct/-0.11pct/-0.06pct/-0.17pct.

Profit forecast and investment advice: Focus on mooncake sales during the Mid-Autumn Festival in the short term, and focus on accelerating the expansion of its catering brands in the medium to long term and expanding growth space outside the province. The company's net profit for 2024-2026 is expected to be 0.56/0.63/0.71 billion yuan, respectively, maintaining the “recommended” rating.

Risk warning: risks such as macroeconomic fluctuations, mooncake sales falling short of expectations, and increased industry competition.