2024Q2 achieved remarkable results in improving efficiency and fees, and profits continued to rise. Maintaining a “buy” rating of 2024H1, the company achieved revenue of 135.62 billion yuan (+3.0% year over year, same below), net profit to mother of 10.42 billion yuan (+16.3%), and net profit of 10.16 billion yuan (+18.1%) after deducting non-return to mother. Looking at 2024Q2 alone, the company achieved revenue of 66.65 billion yuan (+0.1%), net profit to mother of 5.65 billion yuan (+13.2%), and net profit of 5.52 billion yuan (+12.6%) after deducting non-attributable net profit. The company has achieved remarkable results in improving efficiency and reducing fees, and domestic sales are under phased pressure. We lowered our profit forecast. We expect net profit to be 19.06/21.5/24.12 billion yuan for 2024-2026 (original value was 191.8/219.9/246.7), corresponding EPS was 2.02/2.28/2.56 yuan, respectively. The current stock price corresponding to PE is 11.8/10.5/9.3 times. We are still optimistic about the company's long-term high-end brand creation and digital transformation, and maintain a “buy” rating.

Export sales are slightly faster than domestic sales, and revenue from various products has maintained steady growth. By product, the revenue of 2024H1 refrigerator/ washing machine/ air conditioner/ kitchen and bathroom appliances/ water appliances was +1.4%/+4.6%/+3.6%/+2.1%/+5.8%, respectively. By region, 2024H1 (1) domestic revenue was +2.3%, the offline/online market share of refrigerators reached 44.1%/39%, respectively, kitchen appliances 8.6% (+0.2pct)/5.1% (+0.7pct), washing machines 46.5%/38.1%, air conditioning cabinets hanging up 17.95%/10.4%, and smart buildings omni-channel 10.5% (+1.2pct).

By brand, the 2024H1 Casadi brand's domestic and offline channel air conditioners reached 32% of the 15,000+ market share, and the 10000+ share of refrigerators and tumble washing machines reached 39.5% and 82.3%, and the consolidated sales revenue was +145% compared to the same period last year.

Leader brand revenue increased by more than 40%. (2) Overseas revenue +3.7%. Among them, America/Europe/South Asia/Southeast Asia/Australia/Japan/Middle East Africa revenue is -0.1%/+9.2%/+9.9%/+12.4%/+9.3%/-6.2% (+2.4% after conversion to Japanese yen)/+26.8%, of which the retail sales share of refrigerators is 22.9% (+0.4pcts), washing machines have the largest market share in 10 countries including Australia, New Zealand, and Vietnam. Air conditioning has the largest market share in Pakistan and Malaysia, and the upgrading of water appliances drives overseas revenue growth Over 20%.

Digital transformation and supply chain collaboration continued to help improve efficiency and reduce costs. Q2 profitability continued to increase 2024H1 gross profit margin by 30.6% (+0.2pct). By category, gross margins of refrigerators/washing machines/air conditioners/kitchen and bathroom appliances/water appliances were +0.2/+0.3/+0.4 pct year-on-year, respectively. The cost ratio during the 2024H1 period was 21.4% (-0.8pct), with sales/management/R&D/finance expense ratios of -0.5/-0.3/-0.1/+0.1pct, respectively, and the net interest rate to mother under comprehensive influence was 7.7% (+0.9pct). Digital transformation and supply chain collaboration continued to help the company improve efficiency and reduce costs.

Looking at a single quarter, the 2024Q2 gross profit margin was 32.3% (+0.2pct), with a period expense ratio of 21.9% (-0.8pct), with sales/management/R&D/finance expense ratios of -0.4/-0.3/-0.2/+0.1pct, respectively. The net interest rate under comprehensive influence was 8.6% (+1.1pct), and the net profit margin was 8.5% (+1pct), after deducting non-net profit margin of 8.3% (+0.9pct).

Risk warning: Fee cuts fall short of expectations; high-end market demand falls short of expectations; competition in overseas industries intensifies.