Incident: On July 29, 2024, the company released a semi-annual performance forecast. 24H1 achieved revenue of 10.8-11.2 billion yuan, a year-on-year increase of 387.25%-405.30%. Net profit attributable to mother was 0.8 million yuan to 1.2 million yuan, a loss of 5.5732 million yuan for the same period last year, a loss of 3.3 million yuan to 2.2 million yuan, and a loss of 8.7656 million yuan for the same period last year. 24Q2 revenue was 5.97-6.37 billion yuan, up 310.38%-337.88% year on year, net profit loss to mother 5.44-5.04 million yuan, 23Q2 loss 58.21 million yuan, net non-net profit loss 5.28-4.18 million yuan, 23Q2 loss 60.47 million yuan, significant year-on-year loss.

The number and revenue of mass-selling snack stores increased significantly over the same period last year. The 24H1 snack sales business is estimated to have revenue of 10.5 billion yuan - 11 billion yuan, exceeding the full year of last year, with a year-on-year increase of 438.84% to 464.50%. Among them, Q1 revenue was 4.695 billion yuan, and Q2 was about 5.8 billion yuan - 6.3 billion yuan, an increase of 23.5% to 34.2% over the previous year. As of 24H1, the company's monetary capital is about 2.1 billion yuan, which can fully support business development such as investment promotion, supply chain construction, and brand building.

The profit level of the mass snack business continues to improve due to multiple positive factors, ① benefiting from the scale effect brought about by increased store expansion revenue; ② continuing to build its own supply chain advantages, warehousing and logistics advantages, brand building capabilities, refined organizational management advantages, and digital empowerment advantages; ③ improving and optimizing the company's long-term incentive mechanism to fully stimulate the subjective activism of the mass retail business team. After excluding share payments from the 24H1 mass snack business, the net profit is expected to be 0.27 billion yuan to 0.294 billion yuan, with a net interest rate of about 2.57% -2.67% (of which Q1 net interest rate is 2.50% and Q2 is about 2.63%-2.80%). The net interest rate of the mass snack business continues to increase steadily from month to month.

Q2 The mushroom business is off season, and performance is under pressure. Q2 Due to the seasonal low season for edible fungi, the sales price of the company's main product, enoki mushrooms, dropped significantly year-on-year, and the 24H1 edible fungus business lost money. In the future, the company will continue to optimize the quality management of edible fungi, strengthen its brand advantage, and improve overall competitiveness by improving yield and product quality, and reducing product costs. The second half of the year is the peak season for edible fungi, and revenue and profitability are expected to be better than in the first half of the year.

Investment advice: We expect the company's 2024-2026 revenue to be 26.604/42.163/54.594 billion yuan, respectively, up 186.26%/58.49%/29.48% year on year. The company is expected to achieve net profit of 0.166/0.391/0.627 billion yuan in 2024-2026, up 300.09%/135.84%/60.11% year on year, respectively, corresponding to PE 19.4/8.2/ 5.1X, maintaining the “Recommended” rating.

Risk warning: store expansion is not as fast as expected, industry competition intensifies, food safety risks, etc.