Incident: The company released its 24 semi-annual report, and 24H1 achieved operating income of 0.846 billion yuan, yoy +71.64%; net profit to mother of 0.098 billion yuan, yoy +329.38%. Among them, 24Q2 achieved operating income of 0.461 billion yuan, yoy +38.06%; net profit to mother of 0.056 billion yuan, yoy +1315.99%.

1. Domestic: The product lineup continues to be rich, and dried staple foods are worth looking forward to!

The company's domestic revenue in the first half of 2024 reached 0.157 billion, an increase of 24.6% over the same period, and a gross profit margin of 23.23%. In the domestic market, the company mainly carries out omni-channel layout, direct sales and distribution collaborations through simultaneous online and offline development, focusing on its own brands and differentiated products, forming a business content with comprehensive coverage and clear priorities. Online channels. The company has set up online brand flagship stores or franchise stores on mainstream e-commerce platforms such as Tmall, JD, and Douyin, and has signed in-depth cooperation agreements with professional e-commerce companies such as E-pet Mall, and actively embraces new marketing models to adapt to the Chinese market through new marketing methods such as live streaming and establishing private traffic to improve traffic conversion efficiency.

The company's domestic independent brands performed well. In the past two years, the company has created many best-selling products in the terminal market, such as dried duck meat and Haoshijia (98K) canned wet food, which directly led to a rapid increase in the revenue scale and brand exposure of its own brands. In particular, some products under the Jue Yan brand continued to maintain the lead in sales on various online platforms. 24H1's sales expenses were 0.051 billion yuan, an increase of 17.57% over the previous year, and the domestic marketing investment was very effective — during the 618 period of this year, Petty's own brand GMV exceeded 25 million during the 618 period, and the cumulative payment amount across all platforms increased 67% compared to last year's 618 period. The Jueying brand ranked second in the Tmall Dog Snack Brand/Store List and second in the Jingdong Dog Snack Brand List. At the same time, Jueyan's native dried food ranked No. 1 in Douyin's list of popular duck meat staple foods and No. 1 in the Jingdong dry dog food list. Jueyanfeng dried food is produced at the Kangbei factory in Jiangsu, Taizhou. It is one of the production lines of the company's 2021 convertible bond raising project “New staple food project with an annual output of 0.05 million tons”. The company uses the model of starting production while building, and more staple food categories will be listed in the future.

2. Overseas: The company's export business continues to improve, and overseas revenue has increased markedly!

The company's overseas revenue in the first half of 2024 reached 0.689 billion, an increase of 90.2% over the same period, and a gross profit margin of 27.06%. In foreign markets, the company was greatly affected by overseas customers' inventory removal in 2023. Currently, inventory removal has ended, and customers have returned to a normal procurement rhythm. In terms of production capacity, the company currently has large-scale production bases in Vietnam, Cambodia, New Zealand and other countries. Among them, Vietnam's production base was built earlier and is currently in mature operation. Currently, the Cambodian factory was officially put into operation in 2022, with a production capacity of about 0.0112 million tons of pet snacks, which is currently in the process of climbing capacity; the high-quality staple food production line built by the company in New Zealand with an annual output of 0.04 million tons has completed trial production and is about to enter the stage of large-scale production and commercial operation. Currently Some orders are already in progress. The New Zealand factory has raw material quality advantages, cost advantages and equipment advantages, and uses advanced Wenger equipment to create more competitive products. The customer base is mainly distributed in New Zealand, Australia, the United States and other countries and regions. Priority will be given to supplying products from the New Zealand staple food factory for use under the company's own brands, and the company is also actively preparing to enter the domestic market.

3. Investment advice

We expect the company to achieve operating income of 1.976/2.434/2.843 billion in 2024-2026 and achieve net profit of 0.148/0.19/0.245 billion yuan, turning a year-on-year loss of 29%/29%. We believe that the domestic pet economy is developing rapidly, and the company's own brand Jueyan is gradually gaining popularity. New pet staple food products are expected to bring new performance growth points, continue to focus on recommendations, and maintain a “buy” rating.

Risk warning: raw material price fluctuations, exchange rate fluctuations, market competition, liquidity risk, overseas business risk