The company released its 2024 semi-annual report: the company's 2024H1 achieved revenue of 4.001 billion yuan (+5.6% year over year), net profit of 0.093 billion yuan (YoY -26.7%); single Q2 achieved revenue 2.019 billion yuan (YoY -0.5%), net profit to mother 0.038 billion yuan (-43.1% YoY), stable revenue and declining profit in Q2. We expect the price of two-piece cans to be pressured, compounded by the rise in Q2 aluminum prices. Looking ahead to Q3, profits are expected to improve as the cost of two-piece cans comes to fruition and aluminum falls.

The two-piece tank is under pressure for a short period of time, and a marginal improvement is expected in Q3. 2024H1's two-piece cans/iron printing business achieved revenue of 3.807/0.193 billion yuan (+7.1%/-17.0% compared to the same period), accounting for 95.2%/4.8%, respectively, and gross margins of 8.2%/1.7%, respectively. Due to the company's continuous improvement in production capacity layout, leading overseas production capacity layout, and excellent cost control, business resilience contrasted with the trend. We expect the pressure in Q2 to increase month-on-month, mainly due to large fluctuations in Q2 aluminum prices. Looking ahead to 24Q3, we expect that with the gradual stabilization of downstream consumer demand, falling aluminum prices, and smooth price transmission, revenue and profit levels are expected to recover.

The overseas production capacity layout has been improved, driving the profit center to rise. The overseas supply and demand structure is relatively good. The company currently has a production capacity layout in Vietnam, Cambodia, and Malaysia. In 2012-2024, the company invested in the construction of 4.2 billion cans/year production capacity overseas, forming a layout of four production lines in three countries, four regions, and five production lines overseas. 24H1 actively promoted the construction and operation of new construction projects such as Cambodia and Vietnam, consolidating the strategic layout and market position in the Southeast Asia region. In addition, the additional 0.8 billion tank production capacity in Hue, Vietnam is expected to be put into operation at 26H1.

Profit levels can be expected to improve, and cash flow & operating capacity will improve. The 24Q2 company's gross profit margin was 7.5% (-2.0pct year on year), and the net profit margin was 1.9% (year-on-year - 1.4pct). The short-term decline in gross profit margin and net interest rate was mainly due to phased pressure on the cost side. 24Q2 The company's operating cash flow was 0.459 billion yuan (+0.083 billion yuan year over year), improving cash flow. In terms of operating capacity, as of the end of 24Q2, the company's inventory/receivables/accounts payable turnover days were 50/68/41 days, respectively (-1/-7/-7 days compared to -1/-7/-7 days), and operating capacity was steadily optimized.

Profit forecast and investment advice: We expect the company's net profit to be 0.23/0.3/0.39 billion yuan in 2024-2026, respectively, and the corresponding PE is 22X/17X/13X, respectively, maintaining a “buy” rating.

Risk warning: Production capacity investment falls short of expectations, fluctuating raw material prices, and fluctuating RMB exchange rate.