Key points of investment

24H1 achieved rapid growth, reversed the downward trend in gross margin and achieved growth, while net profit margin increased. The channel achieved high-quality growth under the company's high-end cost performance strategy, and continued to be optimistic about the company's long-term growth.

The company's 24H1 performance maintained rapid growth, in line with market expectations. 2024H1 achieved revenue of 5.075 billion yuan, +75.39%; realized net profit to mother of 0.29 billion yuan, +88.57% year over year, realized deducted non-net profit of 0.228 billion yuan, up 212% year on year; 2024Q2 revenue was 1.429 billion yuan, +43.93% year over year; net profit to mother -0.019 billion yuan, achieving year-on-year loss reduction, and performance was in line with the market Expected.

The “D+N” strategy is progressing steadily, and offline business is expanding in an orderly manner

Online channels achieved revenue of 4.09 billion yuan, accounting for 82% of revenue, of which Douyin channel achieved 1.224 billion yuan, an increase of 180% year on year; Tmall achieved 1.083 billion yuan, up 28.32% year on year; and JD achieved revenue of 0.793 billion yuan, up 20.33% year on year.

Looking at offline channels: 1) The distribution business achieved revenue of 0.669 billion yuan, an increase of more than 100% over the previous year; of these, there were 1192 dealers, a net increase of 130 compared to the beginning of the year; 2) the store business achieved 0.23 billion yuan.

24Q2 gross margin increased year-on-year, the effect of scale gradually became apparent, and net margin increased significantly

The company's 2024H1 gross margin was 25.85%, +0.88pct; the 2024Q2 gross margin was 21.90%, +3.24pct year over year, mainly due to the increase in gross margin due to increased scale effects after the company built its own supply chain.

The 2024H1 company's sales/management/R&D/finance cost rates were 17.62%/1.95%/0.24%/0.10%, respectively, +0.39/ -1.95/-0.20/+0.02pct, respectively; the sales, management, R&D and financial expenses rates of the 2024Q2 company were 21.10%/3.53%/0.46%/0.19%, respectively, -0.06/-1.73/-0.21/+0.12pct, respectively. The obvious decline in the company's management expenses ratio is mainly due to the improvement of management efficiency under the integrated transformation of product and sales.

The 2024H1 net margin was 5.71%, +0.40pct year on year; the 2024Q2 net margin was -1.30%, which reduced losses.

Achieve high-quality growth under a high-end cost performance strategy

The company continues its high-end cost performance strategy: 1) Under “D+N” omni-channel collaboration, the channel has achieved high-quality growth. The short video business is the engine of the category, creating popular products such as quail eggs, dried mangoes, mille-layer toast, etc., and effectively undertakes e-commerce on shelves, driving the growth of comprehensive e-commerce. At the same time, after completing the offline organizational adaptation, it began to expand the distribution business and achieve an increase in the share of daily sales products. The company has now launched 105 Japanese products and gradually promoted terminals. New offline pallets with intensive supply and digital distribution tools for mouse marketing have improved efficiency.

2) The one-product, one-chain supply chain continues to innovate and upgrade. The company officially entered the snack supply chain after the nuts were produced. In the future, it will achieve independent production of nuts and some snack products, leading the total cost. 3) Further promote organizational change, build a networked organization under the concept of integrated product and marketing, and improve overall management efficiency.

Maintain the previous profit forecast and maintain the buying rating

The company is expected to achieve revenue of 10.333/13.488/17.603 billion yuan in 2024-2026, with year-on-year increases of 45.25%, 30.52%, and 30.51% respectively; realized net profit to mother is 0.405, 0.578, and 0.781 billion yuan, respectively, with year-on-year increases of 84%, 43%, and 35%, respectively. EPS is estimated to be 1.01/1.44/1.95 yuan in 24-26, and the corresponding PE is 16/11/8 times, respectively.

Risk warning: Terminal demand is weak, channel expansion falls short of expectations, and new product sales fall short of expectations.