Description of the event

The company's 2024H1 gross revenue was 1.468 billion yuan (YoY +2.95%); net profit to mother was 0.247 billion yuan (YoY +18.79%), after deducting non-net profit of 0.21 billion yuan (+17.68% YoY). The company's total revenue for 2024Q2 was 0.614 billion yuan (-6.8% YoY); net profit to mother was 70.851 million yuan (-10.9% YoY), after deducting non-net profit of 63.0428 million yuan (+6.07% YoY).

Incident comments

Under the consumer cost performance trend, price competition is fierce, and growth is under pressure. By product, 2024H1 revenue: hot pot seasoning 0.491 billion yuan (YoY -10.15%), single 2024Q2 (YoY -22.94%); Chinese cuisine seasoning 0.887 billion yuan (YoY +11.62%), single 2024Q2 (YoY +4.75%); Sausage and bacon seasoning 0.033 billion yuan (YoY +21.43%), single 2024Q2 (YoY -87.36%); others 0.054 billion yuan (YoY -0.43%) , single 2024Q2 (YoY -12.17%). Looking at 2024H1 revenue by channel: 2024H1 offline channel 1.211 billion yuan (YoY -5.35%), single 2024Q2 (YoY -15.32%); 2024H1 online channel 0.254 billion yuan (YoY +77.48%), single 2024Q2 (YoY +57.37%). Looking at 2024H1 revenue by region: Eastern region 0.294 billion yuan (YoY +0.55%), single 2024Q2 (YoY -5.77%); Southern region 0.15 billion yuan (YoY +6.38%), single 2024Q2 (YoY +0.42%); Western region 0.527 billion yuan (YoY +13.84%), single 2024Q2 (YoY +2.44%); Northern region 0.122 billion yuan (YoY -8.35%), single 2024Q2 (YoY -29.21%); Central region 0.373 billion yuan (YoY -5.32%), single 2024Q2 (-13.45% YoY). The popularity of hot pot and Chinese cuisine has weakened marginally. Under the trend of consumer cost performance, industry competition has intensified, putting pressure on revenue growth in stages.

The decline in costs improved the gross profit margin, and the expense ratio remained stable. The company's 2024H1 net interest rate increased by 2.24pct to 16.82%, gross margin +3.33pct to 39.56% year over year, and the cost ratio for the period +0.32pct year on year to 21.37%, with detailed changes:

Sales Expense Ratio (YoY +1.12 pct), Management Expense Ratio (YoY -1.17 pct), R&D Expense Rate (+0.21pct YoY), Financial Expense Ratio (+0.17pct YoY), Taxes and Surcharges (+0.02pct YoY). The company's 2024Q2 net income interest rate fell 0.53 pct to 11.53% year on year, gross margin was +2.19 pct year on year, and the period expense ratio was -1.22 pct year on year to 19.26% year on year, with detailed changes: sales expenses ratio (-0.72 pct year over year), management expenses rate (-1.39 pct year over year), R&D expenses rate (+0.61 pct year over year), and financial expenses rate (+0.28 pct year over year), taxes and surcharges (+0.04 pct year over year).

The decline in raw material costs led to an improvement in gross margin, relatively stable cost investment, and continuous improvement in operating profit; in addition, net interest rate declined in Q2 due to a year-on-year decrease in investment income.

Outreach makes up for channel shortcomings, and long-term competitive advantage remains unchanged. The company's epitaxial food products continue to increase revenue and profits on the reporting side, and reinforce the company's small B-side product matrix, and the channel model is misaligned. The long-term functional upgrade logic of polymodulation products continues, and short-term industry demand weakens. However, as one of the leaders, the company has first-mover advantages in product innovation and development, capacity layout, and channel construction, and is expected to go through the cycle and maintain steady growth. The company's 2024/2025 EPS is expected to be 0.48/0.57 yuan, respectively, and the corresponding PE is 19/16 times, respectively, maintaining a “buy” rating.

Risk warning

1. The risk of slow recovery in demand;

2. Industry competition further exacerbates risks;

3. Risk of changes in consumer consumption habits, etc.