The company's 2024H1 revenue increased 26%, performance increased 38%, and the performance was impressive. The company released the 2024H1 interim report. Revenue increased 25.6% year over year to 2.296 billion yuan, gross margin increased 0.6 pcts year over year, sales expenses increased 0.1 pcts to 8% year over year, management expense ratio decreased 0.7 pcts year on year to 9.1% year on year, combined with net profit to mother increased by 1.6 pcts to 18.1% year on year, and net profit to mother increased sharply by 37.8% to 0.42 billion yuan year on year. The overall performance was impressive. Single Q2: The company's single Q2 revenue increased 32.2% year over year to 1.496 billion yuan, gross margin increased slightly by 0.5 pcts year over year to 43.9%, and net profit to mother increased 36.17% year over year to 0.338 billion yuan. Benefiting from the improvement in customer order demand, the company's operating performance in the second quarter was excellent.

By category, the revenue growth rate of buttons in 2024H1 was slightly faster than that of zippers, and other clothing accessories contributed to excellent performance.

1) Button & zipper business: 2024H1's button/zipper revenue increased by 27.13%/24.02% to 0.93/1.26 billion yuan. We judge that short-term metal buttons represent customer demand or performance, which to a certain extent drives the rapid growth of the company's button shipments; in the long run, we believe that zipper products have a wide range of applications. As downstream demand continues to improve, zipper business revenue is still expected to maintain a relatively rapid growth rate. The gross margin of 2024H1 buttons increased 0.27pcts to 42.09% year-on-year, and the gross margin of zippers increased 0.34pcts to 42.89% year-on-year. With the company's continuous investment in product development and continuous improvement in production efficiency, we expect the long-term gross margin of the company's various products to rise steadily. 2) Other apparel accessories business: Revenue from other apparel accessories increased 23.23% year-on-year to 0.08 billion yuan. The company is gradually strengthening product quality and diversity. In the long run, the company will rely on existing zipper and button customers to drive the growth of the other accessories business.

By region: Domestic/international businesses have all performed well. 2024H1 domestic revenue increased 24.81% year on year to 1.536 billion yuan, gross margin increased by 1.85 pcts year on year, international revenue increased 27.15% to 0.76 billion yuan year on year, gross margin decreased 2.05 pcts year on year to 42.85% year on year, 2024H1 domestic demand gradually recovered, and order growth rate was excellent; at the same time, the company accelerated its international market layout and transformation. We expect the company's share among old customers to expand the scale of revenue in the first half of the year. At the same time, the company's new Customers continue to expand, laying the foundation for the sustainable growth of the company's long-term business.

The Vietnamese plant was put into operation, the Bangladesh and domestic factories were upgraded and production capacity continued to expand. As of the end of 2024H1, the company's half-year production capacity for buttons was 5.9 billion grains (up 0.1 billion grains), and the half-year production capacity for zippers was 0.44 billion meters (up 0.015 billion meters). Domestic/overseas production capacity accounted for 82.07%/17.93%, respectively, and domestic/overseas capacity utilization rates were 75.49%/49.59%, respectively. We judge that with the gradual commissioning of the Vietnamese factory, the scale of overseas production capacity is expanding, and at the same time, the abundance of customer orders has led to an increase in the company's overall capacity utilization rate. In the long run, we judge that the company is still in the phase of expanding production to meet the growing order demand of brand customers.

Looking ahead to 2024, we expect the company's performance to grow 26%. The company's overall order acceptance performance improved steadily in the first half of the year. Looking at the whole year, we judged that the inventory removal of downstream brands was smooth, and the company's overall business situation was clearly optimized compared to 2023. Currently, we expect the company's revenue and performance to be expected in 2024.

Profit forecasting and investment suggestions: As a leading global accessories company, the company's product research and development capabilities have improved, business scale expansion drives revenue growth, smart manufacturing has improved production efficiency, and its competitive advantage is obvious. We raised the company's net profit forecast for 2024-2026 to 0.703/0.816/0.949 billion yuan. The current price corresponds to 2024 PE 20 times, maintaining the “buy” rating.

Risk warning: Risk of raw material price fluctuations, production capacity release falling short of expectations, risk of demand fluctuations, and uncertainty about the pace of capacity release.