Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 2.088 billion yuan, +59.43% year over year; realized net profit of 0.145 billion yuan, +47.68% year over year; realized net profit without return to mother of 0.146 billion yuan, +48.08% year over year. Looking at a single quarter, 24Q2 achieved revenue of 0.686 billion yuan, +8.55% year over year; realized net profit of 0.052 billion yuan, +48.83% year over year; realized net profit of 0.053 billion yuan without return to mother, +49.76% year over year.

Supply chains and operational advantages are solid, and the basic market business bucked the trend. Q2 focused on developing products to adjust the structure, and profit growth rate was higher than revenue. The company's 24H1 achieved GMV 4.3 billion yuan, an increase of 18% year over year, and achieved total revenue of 2.088 billion yuan/year over year, of which the Internet sales/Internet service business achieved revenue of 1.941/0.146 billion yuan, +52.22%/+328.63% year over year; of these, single 24Q2 revenue was 0.686 billion yuan/year over year +8.55%. We believe that Q1 led to a sharp year-on-year increase in revenue due to the misalignment of the New Year's Festival and the peak sales season for traditional Spring Festival alcohol. Q2 is a low season for traditional alcohol consumption, and the month-on-month deceleration is normal. Q2 The price system for leading products fluctuated, and profit margins were compressed due to increased internal channel volume+ competition. The company took the initiative to strategically choose to focus on sales of developed products and improve the product structure. The profit performance was significantly higher than revenue, and strategic product reserves faced the peak season of the Mid-Autumn Festival National Day.

Q2 Improved product structure led to improved gross margin, increased investment in platforms and promotion expenses, and overall net margin was on the upward channel. Looking at profit-side performance, 1) Margin side: The company achieved gross profit margin of 23.45% in 24H1, or -1.28pcts year over year. We believe that the company's gross profit level is mainly affected by the product structure. The Q1 standard organic sales lead with thin overall profit margins+ New Year's holiday season promotions led to a year-on-year decline of 4.5 pcts, lowering the overall level for half a year. The Q2 strategy focused on developing products, which increased by 2.9 pcts month-on-month and 3.1 pcts year-on-year to 25.41%. 2) Rate side: The company's cost rate for the 24Q2 period was 19.9%, +5.31pcts year on year, with sales/management/R&D/finance expenses being 15.77%/4.75%/0.37%/-0.99%, respectively, +4.7/+1.1/+0.1/-0.6pcts year over year. The year-on-year increase in sales expenses was mainly due to increased investment in platforms and promotion fees. The increase in the management fee rate was mainly due to an increase in the number of employees, which led to an increase in employee remuneration. The 24H1 company introduced 283 talents and firmly implemented the “Pilot Program” incentives The mechanism reserves human resources for medium- to long-term development (the average age of the company's employees is 28 years old, 35% from leading e-commerce companies, 40% from major Internet companies). In summary, the company's 24H1 net interest rate was 6.97%, -0.55pcts year on year; single 24Q2 net profit margin was 7.54%, +2.04pcts year on year.

The cooperative relationship between manufacturers continues to deepen, and the basic market business+live e-commerce is growing on two wheels. Looking at recent business performance, we believe that the breadth and depth of the company's business cooperation continues to expand, and two-wheel drive is growing at high quality:

1) In terms of basic market business, the company, as a leading operator, enjoys the dividends of expanding and centralizing the boosting of alcohol online tracks, and consolidating the advantages of multi-segmented tracks. During the 618 period, it helped the leading liquor brand Guanqi GMV grow by more than 50%, focusing on achieving 0.08 million box sales with Luzhou Laojiao's strategic cooperation product, Changyu Guanqi ranked first in the platform wine category, Tsingtao Brewery ranked first in the platform beer category, and Yunnan Baiyao defended the title of Jingdong Oral Care No. 1 for 11 years; in addition, a flagship store was added in Jingxi Fengjiao. In August, cooperation with leading manufacturers continued to deepen.

2) In terms of live streaming business, 24H1 has opened new live broadcast rooms for brands such as Douyin, Kuaishou, WeChat video accounts, etc., to help the brand open up sales channels and continue to contribute to the online sales channel for customized products, Luzhou Laojiao Premium Liquor Store, Luzhou Laojiao Touqu Liquor Flagship Store, and Xifeng Liquor flagship store. Amount added.

Reiterate the core logic of Xinhuadu: the first e-commerce liquor stock; focus on the rapid expansion of online liquor, beta+ companies have strong supply chain and strong operational capabilities. The business model is highly scarce, and strong growth can be expected.

Online liquor sales are still in a rapid expansion channel. The Q2 off-season sales helped liquor's online performance was still impressive. GMV in the liquor category increased by about 30% year-on-year during the JD 618 period. According to Jiuai Zhixing data, during the 2024 mid-year promotion period, liquor sales on mainstream e-commerce platforms were close to 10 billion dollars, +39% over the same period last year. As the first stock in alcohol e-commerce, the company released a dual equity incentive plan. The 3-year net profit target compound growth rate of 30% is outstanding. In the future, it is expected that it will jointly drive long-term growth through brand expansion, category resource expansion, and deepening cooperation in product development.

Profit forecast and investment advice: We expect the company's 24-26 revenue to be 3.89/4.95/6.1 billion yuan, respectively, and net profit to mother 0.27/0.35/0.44 billion yuan, respectively. The current stock price corresponds to the 24-year P/E of 12X, maintaining a “highly recommended” rating.

Risk warning: risk of weak retail environment; risk of increased market competition; risk of fluctuations in e-commerce platform operations