Incident: 2024H1 achieved revenue of 2.459 billion yuan, an increase of 29.84%; realized net profit of 0.319 billion yuan, an increase of 30.01%; realized net profit without deduction of 0.273 billion yuan, an increase of 17.96%. 2024Q2 achieved revenue of 1.239 billion yuan, an increase of 23.44%; realized net profit attributable to mother of 0.16 billion yuan, an increase of 19.12%; and realized deducted non-net profit of 0.135 billion yuan, an increase of 1.58%.

Revenue is resilient, the channel side is steady, and new categories have maintained high growth. 2024H1 distribution/direct sales/e-commerce achieved revenue of 1.77/0.11/0.58 billion yuan respectively, an increase of 35%/-44%/48%. Direct sales companies actively contracted, and distribution and e-commerce channels maintained good growth. Spicy braised snacks/casual baking/deep-sea snacks/egg snacks/potato snacks/dried fruit nuts/konjac jelly puddings/others achieved revenue of 9.0/3.4/3.2/2.4/2.2/0.21/0.18/0.04 billion yuan, respectively, with a year-on-year ratio of 25.8%/12.6%/11.8%/150.5%/39.3%/96.0%/44.0%/-57.0%.

Increased sales expenses and changes in channel structure slightly affect profit levels. 2024Q2 achieved gross profit margin of 33.0%, -3.1 pct year over year, +0.9 pct month-on-month; Q2 gross sales gap -5.1 pct year over year, +0.3 pct month-on-month. The gross sales gap decreased a lot year over year. The core was that direct management contracted actively, but Q2 on the sales cost side increased brand launch (egg king press conference, snack fair, etc.). Other expenses are basically stable. The management fee rate is +0.7 pct year over year, which is related to equity incentives. 2024Q2 achieved a net interest rate of 13.0%, -1.1 pct year on year; net interest rate of 10.9% without return to mother, -2.4 pct year on year.

The management level is stable, and the multi-brand layout is gradually being improved. Apart from the active contraction of direct sales, the growth rate of all other channels has been relatively stable. The company's brand strategy continues to advance. Its strategic sub-brand “Big Devil” has received many honorary awards. The second strategic sub-brand “Egg King” and packaging designer Pan Hu have collaborated to launch innovative packaging categories, and the layout of multi-brand operations has been gradually improved.

Investment advice: The company's revenue for 2024-2026 is expected to be 5.135/6.199/7.233 billion yuan, +24.8%/20.7%/16.7% YoY. Net profit to mother was 0.655/0.866/1.098 billion yuan, +29.5%/32.3%/26.7% year-on-year, corresponding PE was 16/12/9X, maintaining a “buy” rating.

Risk warning: Increased competition in the industry, food safety issues, fluctuating raw material costs.