occurrences

Company Announces 2024 Interim Report. In 24H1, the company achieved total revenue of 0.327 billion yuan, -21.53% YoY, and net profit to mother 0.042 billion yuan, or -43.37% YoY. In 24Q2, the company achieved total revenue of 0.161 billion yuan, -24.94% year-on-year, and net profit of 0.023 billion yuan to mother, or -40.12% year-on-year.

Supermarket channels increase revenue, and the number of channels is steadily expanding

1) In the first half of the year, supermarket channel revenue increased. 24H1, the company's retail/supermarket/wholesale/direct sales and other/ e-commerce customer channels achieved revenue of 2.20/0.15/0.084/0.004/0.001 billion yuan, -19.98%/+6.50%/-25.57%/-54.01%/-27.05%; 24Q2, the top three retail, wholesale/supermarket channels achieved revenue of 0.107/0.045/0.007 billion yuan, respectively, -22.92%/-26.15%/-7.95 %

2) The number of franchised stores has been adjusted. As of the end of 24H1, the number of the company's franchisee stores/dealerships/supermarket customers/wholesale customers was 1,778/746/94/559 respectively, a net of -38/+3/+7/+12 compared to the end of the quarter.

3) Other products grew in the first half of the year, and revenue from meat, poultry and fishery products was under pressure. In 24H1, the company's meat and poultry/fisheries/other products achieved revenue of 0.212/0.089/0.022 billion yuan, compared to -22.52%/-23.62%/+7.89%; in 24Q2, meat and poultry/fisheries/other products achieved revenue of 0.112/0.042/0.006 billion yuan, respectively, -23.54%/-27.04%/-25.30%.

4) Revenue growth in the southwest region puts pressure on East China, the base. In 24H1, the company achieved revenue of 0.306/0.009/0.006 billion yuan in East China/Central China/Southwest China, respectively; in 24Q2, revenue of the above three regions was 0.15/0.005/0.003 billion yuan, or -25.06%/-26.25%/+7.01% YoY.

A slight decline in gross margin and an increase in management fee ratios affect net interest rate 1) Affected by a slight decline in gross margin and an increase in management expense ratios, etc., the company's net interest rate level declined in the short term.

In 24H1, the company's net profit margin was -4.98 pct year on year to 12.93%. The decline was mainly affected by a decline in gross margin and an increase in management expense ratio. The gross margin was 24.85%, -1.27 pct year on year. In 24Q2, the company's net margin/gross margin was 14.51%/24.70%, respectively, -3.67/-1.34pct.

2) The increase in depreciation and amortization affects the rate of expenses during the period. In 24H1, the company's sales/management/R&D/finance expenses rates were 5.15%/7.02%/0.51%/-2.16%, respectively, compared with +0.86/+3.01/+0.03/-0.80pct. The increase in the management expense ratio was mainly due to the increase in shared expenses due to the commissioning of the new plant. In 24Q2, the company's sales/management/R&D/finance expense ratios were +0.01/+3.03/+0.01/-0.86pct, respectively.

Investment advice

We expect the company's net profit to be 0.094/0.1/0.104 billion yuan in 24/25/26, respectively, up -30.35%, 5.87%, and 4.36% year-on-year, corresponding to PE 26/24/23 times on September 2 (market value 2.4 billion yuan), maintaining an “incremental” rating.

Risk warning

Food safety risks, raw material price fluctuation risks, and terminal demand falling short of expectations.