Matters:

The company released its 24-year report, with operating income of 2.042 billion yuan (-11.44%), net profit of 0.161 billion yuan (-32.13%), deducting non-net profit of 0.162 billion yuan (-27.57%). 24Q2, operating income of 1.079 billion yuan (+7.25%), net profit to mother 0.088 billion yuan (-3.51%), deducting non-net profit of 0.087 billion yuan (+5.75%).

Commentary:

Revenue from epidemic prevention products declined year on year, and revenue from regular business grew steadily. 24H1's revenue from quarantine protective equipment was 0.09 billion yuan, down 81.70% year on year. After excluding quarantine protective equipment, regular business revenue was 1.953 billion yuan, up 7.53% year on year; after excluding quarantine protective equipment, 24Q2's revenue from quarantine protective equipment was 0.039 billion yuan. After excluding quarantine protective equipment, regular business revenue was 1.04 billion yuan, up 11.85% year on year, up 13.94% month on month.

Domestic business: After excluding the impact of quarantine protective equipment, both the cinema and retail business grew steadily. Overall, 24H1's domestic revenue was 0.896 billion yuan, down 23.00% year on year. After excluding quarantine and protective equipment, domestic revenue from the regular business was 0.807 billion yuan, up 19.20% year on year. On the cinema line business side, 24H1's domestic revenue from the cinema line business was 0.528 billion yuan. After excluding quarantine and protective equipment, the domestic revenue from the regular cinema business was 0.502 billion yuan, an increase of 17.69% over the previous year. 24H1's domestic surgical sensory control product line sales grew rapidly, with a year-on-year growth rate of more than 20%. In addition, the company's domestic stoma and modern wound care products business also achieved rapid growth. On the retail line business side, the domestic revenue of 24H1's retail line business was 0.34 billion yuan. After excluding quarantine and protective equipment, the domestic revenue from the regular retail line business was 0.278 billion yuan, an increase of 26.82% over the previous year. 24H1 promoted the construction of domestic retail channels. As of the disclosure date of the 2024 mid-year report, the company had 15 direct online e-commerce stores, which together reached 9.15 million fans. At the same time, the coverage rate of the company's top 100 pharmacy chains reached 98%, covering more than pharmacy stores in total 0.2 million house.

Overseas business: Despite the complex external environment, we have gradually achieved good recovery. 24H1's overseas revenue was 1.14 billion yuan, up 0.43% year on year. Excluding quarantine and protective equipment, overseas regular revenue was 1.139 billion yuan, an increase of 0.68% year on year. 24Q2's overseas revenue was 0.602 billion yuan, up 3.70% year on year and 11.68% month on month. The 24H1 international situation is still full of changes and uncertainties, posing great challenges to the company's international business, yet the company's overseas business has gradually recovered well in a complex external environment. On the one hand, 24H1 has actively promoted the construction and operation of production bases in Africa (as of the disclosure date of the 2024 mid-year report, the company has completed trial operation and officially put into operation, and is simultaneously promoting the localized business layout of the African production base). Currently, the company is planning to lay out products at various stages of wound management, and has set up an international marketing department at the international marketing center to build the company's international brand image to implement key global market coverage and accelerate the deep penetration of strategic customers.

Investment advice: The performance is in line with expectations, and the profit forecast remains unchanged. We expect the company's net profit to be 0.41, 0.52, and 0.64 billion yuan in 24-26, with year-on-year growth rates of 106.0%, 26.7%, and 23.4%, respectively. The corresponding PE is 13, 11, and 9 times. According to DCF model estimates, the company was given a valuation of 8 billion yuan, corresponding to a target price of about 30 yuan, maintaining a “strong push” rating.

Risk warning: 1. Business growth falls short of expectations; 2. The consolidation effect of the acquisition targets falls short of expectations.