The company's revenue/net profit increased 10.3%/31.5% in the first half of the year, maintaining a high dividend ratio. The company achieved operating income of 1.25 billion yuan in the first half of 2024, an increase of 10.3%, and net profit of 0.18 billion yuan, an increase of 31.5%. Continuous optimization of product and channel structures combined with supply chain efficiency improvements. Gross margin increased 5.1 pcts to 46.4% year on year, and net sales margin increased 2.10 pcts to 14.07% year on year. Furthermore, the company's cash flow was strong. As of the first half of 2024, the total amount of cash, cash equivalents and various bank deposits reached $2.665 billion. The interim dividend payout was $0.0538 per share (i.e. HK$0.0588 per share), and the corresponding dividend ratio reached 40%.

The home care business is steadily consolidating its market position, and the pet business is developing with high quality. By category in the first half of 2024: Revenue from home care products was 1.16 billion yuan, up 11.5%. Explosive mosquito repellent products showed positive performance. Omni-channel GMV such as Chaowei Mosquito Repellent Small Green Bottle and Unbreakable Mosquito Repellent Incense increased by 1057%/89% respectively. According to Nielsen statistics, the company ranked first in the market share of insecticidal mosquito repellent/toilet cleaning categories, with a market share of 17.5%/20.7%, respectively; the company adheres to the profit orientation and focuses on incubating functional pet snacks. Features For new products such as fresh food staple food, the transformation effect of offline stores was obvious, and high-quality store expansion continued. By the end of June 2024, the number of pet stores reached 46; in addition, revenue from personal care products was 0.035 billion yuan, a decrease of 18.4%.

The company continues to enhance product competitiveness and consolidate its market position through high R&D investment and scientific and technological innovation.

Online channels and multiple platforms focus on explosive products, and actively expand new retail channels offline. By channel in the first half of 2024, the company's online revenue also increased by 18.9% to 0.41 billion yuan, and the revenue share increased to 32.5%, focusing on strong products. It performed well on new e-commerce platforms and direct sales channels such as Douyin. Multiple categories topped the list on various platforms during the 618 period; offline revenue was 0.84 billion yuan, an increase of 6.5%. The company actively expanded new retail channels, expanded large-scale membership supermarkets and home business scenarios such as Sam, focusing on strengthening the distribution of high-margin products and consolidating market share.

Investment advice. As a leader in the home care segment, the company continues to promote a multi-brand, multi-category omnichannel strategy, and steadily promotes the pet business layout. The channel layout combines a high-growth online platform and offline expansion.

The company's performance is steady and cash flow is strong. Based on the company's performance in the first half of 2024, we expect the company's 2024-2026 revenue to be 1.805/1.99/2.181 billion yuan, up 11.7%/10.3%/9.6% year on year, and net profit to mother of 0.188/0.195/0.213 billion yuan, respectively, up 7.2%/3.9%/9.5% year on year, maintaining the “increase” rating.

Risk warning: industry competition intensifies; raw material costs rise; product upgrade promotion falls short of expectations.