Event: On August 27, the company released its 2024 semi-annual report. With 2024H1, the company achieved operating income of 0.846 billion yuan, +71.64% year over year; realized net profit to mother of 0.098 billion yuan, +329.38% YoY; EPS 0.39 yuan/share, +329.41% YoY.

Comment:

Q2 Performance increased month-on-month, and the domestic market maintained a high growth rate. On a quarterly basis, the company's Q2 revenue for a single quarter was 0.461 billion yuan, +20.00% month-on-month; net profit to mother was 0.056 billion yuan, +34.80% month-on-month.

By region, the company's products were still mainly exported in the first half of the year. Overseas market revenue accounted for 81.44% of total revenue. However, compared with the same period in 2022 (23 years affected by the epidemic, export business data was abnormal), the domestic market revenue growth rate was higher, and it is expected that it will also become the core growth sector for the company's performance in the future.

Overseas orders are steadily picking up, and the gradual increase in the capacity utilization rate of each factory is expected to drive profit growth.

Currently, after experiencing a downturn in 2023, the company's overseas market business has resumed normalized operations, and the gross margin level has increased by 5.00pct to 27.06% compared to 2022. Specifically, the Vietnamese factory is relatively mature in operation and management and is at full production, which is the company's main source of profit; the Cambodian plant is in a phase of climbing capacity, achieving net profit of 18.4013 million yuan in the first half of the year, and the subsequent profit level is expected to grow at the same time as production capacity is released; the New Zealand factory is mainly based on staple food production lines and is currently still in the commissioning stage, losing 5.6329 million yuan in the first half of the year. It is expected that the utilization rate will gradually increase to full production over the next 3-4 years to achieve profit growth.

Independent brands focus on the middle and high-end markets, and the launch of popular single products helps increase revenue. The company is actively implementing the “multi-brand matrix, big single product promotion” strategy in the domestic market, focusing on promoting brands such as Jueyan and Haoshijia, launching popular products such as Jue Yan dried duck meat and canned Haoshijia (98K) wet food, and adopting an online and offline omni-channel sales strategy. The independent brand Jueyan performed well during the 618 period. The cumulative payment amount across all platforms was +67% compared to the same period, making it one of the leading sales platforms. At the same time, the brand launched a key new product, dried food, in 618. It is expected that under the company's relevant scientific publicity and promotion of this product, this product will bring higher revenue growth support to the company.

Profit forecast and investment rating: We expect the company to achieve revenue of 1.958, 2.321, and 2.81 billion yuan respectively in 2024-2026, and realized net profit of 0.172, 0.196, and 0.239 billion yuan, respectively. The corresponding PE for 2025-2026 is 14.88 and 12.24x, maintaining the “recommended” rating.

Risk warning: Private brand expansion falls short of expectations; exchange rate fluctuates greatly; raw material prices have risen markedly.