Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 2.088 billion yuan, an increase of 59.43% year on year; realized net profit due to mother 0.145 billion yuan, an increase of 47.68% year on year; realized net profit deducted from non-mother 0.146 billion yuan, an increase of 48.08% year on year. According to calculations, 2024Q2 achieved operating income of 0.686 billion yuan, an increase of 8.55% over the previous year; realized net profit of 0.052 billion yuan, an increase of 48.83% over the previous year; realized net profit without deduction of 0.053 billion yuan, an increase of 49.76% over the previous year.

Q2 There was a steady increase in the basic market business, demonstrating steady development and resilience. 24Q2's revenue increased 8.6% year over year, and it was not easy to achieve growth with a high base in the same period last year. Looking at the industry as a whole, according to data from Jiuai Zhixing, e-commerce platforms have become an important channel for liquor sales. As of 24Q1, more than 50% of consumers chose to buy alcohol products online. At the same time, the new gameplay of 618 this year increased the participation of online Internet users in the big promotion. In 2024, the number of active users on all major e-commerce platforms showed varying degrees of increase over the same period last year. Although the mid-year promotion is a low season for liquor consumption, e-commerce platform sales have brought growth to the liquor market. At the company level, the company's GMV increased 18% year-on-year in the first half of the year. During the “618” period, the company helped the leading liquor brand Guanqi's GMV grow by more than 50%. 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 No. 1 oral care in Jingdong for 11 years. The total live broadcast time was over 3,600 hours, and the “short delivery” matrix helped to achieve GMV exceeding 100 million yuan, effectively increasing the brand's volume. Recently, the “Master Master” series jointly developed by the company and Fenjiu was officially unveiled, which is a reflection of deepening cooperation between manufacturers and may further contribute to revenue growth in the future.

Gross profit margins have increased, and government subsidies have increased profits. 24Q2's gross margin increased 3.1 pct year over year and 2.9 pct month-on-month, which is expected to be related to changes in product structure. The 24Q2 sales expense ratio and management fee ratio increased by 4.7/1.1 pct, respectively. This is expected to be related to the slowdown in revenue growth and the increase in platform promotion expenses. 24Q4 received 27.5 million yuan in government grants, which also contributed to net profit. Under the combined influence, 24Q2 net profit margin increased by 2.0pct to 7.5% year-on-year.

Investment advice: The company's revenue is expected to be 3.9/4.94/6.08 billion yuan in 24-26, with a year-on-year growth rate of 38.1%/26.6%/23.1%. Net profit due to mother is expected to be 0.27/0.34/0.44 billion yuan, respectively, with a year-on-year growth rate of 36.3% /25.4%/26.8%, maintaining a “buy” rating.

Risk warning: the progress of online liquor falls short of expectations; competition in the online liquor business increases risk; risk of brand licensing management; risk of falling short of expectations in the development of own business names; risk of online liquor sales policy.