Incident: Beiding Co., Ltd. announced its 2024 semi-annual report. In 2024H1, the company achieved revenue of 0.32 billion yuan, YoY +0.2%; realized net profit to mother 0.03 billion yuan, YoY -15.2%.

After conversion, the company achieved revenue of 0.16 billion yuan in 2024Q2, YoY +7.8%; realized net profit to mother 0.01 billion yuan, YoY -53.4%. We believe that in Q2, Beiding's export sales continued to be strong, domestic sales remained flat year on year, and revenue growth picked up in a single quarter.

Q2 The revenue growth rate in a single quarter was positive: Looking at the subregion: 1) Q2 Beiding's own brand's domestic revenue YoY +0.1%. Domestic consumption of small kitchen appliances is relatively lackluster. Beiding stepped up marketing and promotion efforts and continued to launch new products. Q2 Company's domestic sales performance was stable. 2) Q2 Beiding's export revenue YoY +31.1%. Among them, overseas revenue from the brand business YoY was +30.6%, and the expansion of the overseas business of independent brands in terms of regions, channels, products, etc. is progressing normally; OEM business revenue YoY +33.3%, benefiting from the recovery of OEM customer inventory, the company's OEM business revenue continued to grow at a high rate. We believe that with the gradual recovery of domestic consumption, Beiding products are expected to be favored by quality consumers, and subsequent revenue is expected to pick up.

Q2 profitability declined year over year: Beiding's Q2 net profit margin was 5.7%, -7.5 pct year on year. The company's profitability declined year-on-year, mainly due to: 1) Due to the increase in the share of export business with lower gross margin, Beiding's gross margin was 1.5 pct year over year in Q2. 2) The cost rate during the Q2 period was +6.8 pct year on year. The main reason was that the company increased its marketing and promotion efforts for domestic and overseas business of its own brands. The Q2 sales expense ratio was +5.4 pct year over year; the exchange rate change was lower than the same period last year, and the Q2 financial expense ratio was +3.0 pct year over year. We believe that the company continues to improve operation and management efficiency, and profitability is expected to improve as consumption recovers.

Q2 operating cash flow decreased year-on-year: Q2 Beiding's net operating cash flow +9.354 million yuan, YoY -5.2%. Q2 Beiding's operating cash flow declined year-on-year, mainly due to: 1) the company increased inventory preparation, Q2 cash YoY +17.1% for purchasing goods and receiving labor payments; 2) the increase in OEM/ODM business revenue and the increase in the share of independent brands' business revenue through the distribution model had an impact on the accounts receivable period. The balance of accounts receivable at the end of the period YoY was +15.3%.

Investment advice: Beiding products are positioned as high-end and are expected to benefit from the upgrading of domestic consumption. The company optimizes product structure, expands categories, promotes independent brands to go overseas, expands omnichannel user touchpoints, and business performance is expected to continue to improve. We expect the company's EPS to be 0.22/0.28/0.34 yuan from 2024 to 2026, maintain a buy-A investment rating, and give a dynamic price-earnings ratio of 45 times in 2024, which is equivalent to the target price for June of 9.88 yuan.

Risk warning: Competition in the industry has intensified, raw material prices have risen sharply, and the RMB has appreciated sharply.