Introduction to this report:

H1's revenue and profit both exceeded expectations. H2 orders have continued to be steady so far, and full-year performance growth is expected to be quite certain.

Key points of investment:

Investment advice: Considering that the company's H1 revenue and profit both exceeded expectations, we revised the 2024-26 EPS forecast to 0.60/0.68/0.77 yuan (0.56/0.65/0.76 yuan before adjustment, respectively). Considering that the company is a leader in domestic garment accessories, the certainty and resilience of steady growth in performance is stronger than that of its peers. The company was given 24 times higher PE than the industry average in 2024, raised the target price to 14.48 yuan, and maintained an “gain” rating.

H1 revenue and profit both exceeded expectations, and other earnings boosted profits. H1 revenue was 2.23 billion yuan/ +25.6% (Q1 +14.8% /Q2 +32.2%), H1 net profit was 0.42 billion yuan/ +37.8% (Q1 +45.3% /Q2 +36.2%); H1 gross margin was 41.8% /+0.6pct (Q1+0.2pct, Q2+0.5pct), mainly due to scale effects and intelligent manufacturing; H1 net profit margin 18.3% /+1.8pct (Q1+2.3pct, Q2+ 0.8 pct). Q2 Expense rates are well controlled. Sales/management/R&D expense ratios were +0.54/-1.08/-0.60pct, respectively. The increase in sales expenses was mainly due to bonus accrual, financial expenses -0.01 billion (including exchange gains); credit impairment losses of 0.014 billion, mainly due to bad accounts receivable; 0.018 billion yuan (H1 total 0.037 billion, mainly VAT deduction 0.016 billion, government subsidies 0.02 billion). The mid-term dividend was 0.234 billion, and the dividend rate was 56%.

Button zippers are two-wheel drive, and the international market continues to grow faster than the domestic market. 1) By product:

① Buttons: H1 revenue 0.93 billion yuan/ +27.1%, gross profit margin 42.1% /+0.3 pct. We should increase the amount of metal buttons rapidly, mainly due to high gross profit. ② Zipper: H1 revenue 1.26 billion yuan/ +24.0%, gross profit margin 42.9% /+0.3 pct, which we think is mainly due to scale effects. 2) By region: ① International: H1 revenue 0.76 billion yuan/ +27.2%, gross profit margin 42.9%/-2.0pct.

② Domestic: H1 revenue 1.54 billion yuan/ +24.8%, gross profit margin 41.3% /+1.9pct.

Orders continued to be steady in August, and the Vietnamese factory significantly strengthened its ability to accept orders. We expect the order growth rate in July to be double digits, continuing the July trend from August to now, and H2 is expected to continue to grow steadily. The Vietnam Industrial Park began operation in March. Currently, it is mainly engaged in market and customer development. It is expected that orders will start from the end of 2024 to 2025, and the annual revenue for 2024 is expected to be at the level of 10 million, which is expected to significantly enhance the ability to accept orders in the international market.

Risk warning: downstream demand falls short of expectations, capacity expansion falls short of expectations