Event: in 2022, H1 realized operating income of 2.312 billion yuan, year-on-year + 10.12%, return net profit of 111 million yuan, year-on-year + 2.02%, deducted non-return net profit of 101 million yuan, year-on-year + 138.69%.

Of this total, Q2 achieved revenue of 997 million yuan, + 12.65% compared with the same period last year; net profit returned to the mother was 17.9806 million yuan,-35.85% compared with the same period last year, deducting 14.9403 million yuan from non-return net profit, turning losses into profits over the same period last year.

The deduction of non-net profit reached an all-time high, and the outlook is optimistic in the later stage. In the first half of this year and Q2 single quarter, the company's net profit of deducting non-return reached a record high. Due to the investment income of 47.8 million yuan from the sale of Suzhou Logistics Company by Q2 Company last year, the net profit this year has declined compared with the same period last year, which is more accurate than deducting non-net profit. We believe that the main reasons for the rapid growth of the company's performance are as follows: 1) the opening speed of joining stores accelerated significantly last year, and this year's performance began to release. 2) the epidemic in Shanghai occurred in the off-season of Q2 company, which had a limited impact on the company's own stores, while the company obtained partial guarantee and group purchase orders as a guarantee unit, which made up for the loss caused by the inability of the store to operate.

3) the rapid development of community group purchase business can improve the income level of single store and make up for the loss of single store income affected by the epidemic. Looking forward to the second half of the year, the epidemic has an impact on all industries, resulting in a decline in the consumption capacity of residents, coupled with the fact that Q3 belongs to the off-season of the company, and the high temperature in July and August is not conducive to the sales of leisure snacks. It is speculated that Q3 company is facing certain pressure, but recently, the high temperature in Jiangsu and Zhejiang has improved, and the double festival is approaching. We speculate that the performance of the company in the fourth quarter can achieve better growth during the peak season, and we are more optimistic about the company's annual performance. In the long run, the rapid opening of franchise stores will continue, and the gradual expansion of community group buying business will accelerate the company's overall revenue growth, dilute costs and enhance the company's overall profitability.

The epidemic affected store opening in the first half of the year and is expected to accelerate in the second half of the year. In terms of channels, the business income of the company's direct stores in the first half of this year was 1.419 billion yuan,-7.41% compared with the same period last year. We calculated that the revenue per store was 653800 yuan,-5.62% compared with the same period last year. It is speculated that most of the direct stores are opened in Shanghai, which is greatly affected by the epidemic. The company's franchise business income is 332 million yuan, + 75.75% compared with the same period last year, and the revenue per store is 234700 yuan, + 7.37% compared with the same period last year, reflecting the improvement of the profitability of joining stores. at the same time, it is also related to the large number of new stores opened in the first half of last year and the relatively low number of new stores this year; the revenue of the special canal group purchase business is 239 million yuan, which is speculated to be mainly driven by the income growth of guaranteed supply orders and distribution model. As of H1, the company covers a total of 71 KA/CVS systems, with a coverage rate of 25%; e-commerce revenue is 263 million yuan,-3% year-on-year.

As of H1, the company had 3583 total stores, an increase of 95 over the end of last year, of which 2170 were directly operated, a decrease of 24, and 1413 joined, an increase of 119 over the end of last year. The company's stores are mainly distributed in Shanghai, Zhejiang and Jiangsu. The epidemic in Shanghai affected the opening of stores in the above three places in the first half of the year. It is expected that the annual rate will pick up in the second half of the year. We speculate that the total number of stores in the company is expected to reach more than 4000 by the end of the year.

The epidemic affected the level of gross profit margin, but also reduced the company's sales expenses. The company's H1 gross profit margin is 44.33%, year-on-year-1.04pct, which is mainly affected by the rise in raw material prices, labor costs and freight charges during the epidemic, and it is speculated that the gross profit margin level will be relatively stable in the second half of the year. The H1 sales expense rate / management expense rate is 25.90% 12.15%, respectively, compared with the same period last year-4.38/1.78pct. It is judged that the decline in sales expense rate is due to the decrease in sales expenses in Shanghai during the epidemic, but in the long run, with the expansion of revenue scale and the improvement of the company's brand power in other cities, the rates of sales expenses and management expenses are expected to decrease gradually.

Corporate profit forecast and investment rating: we believe that in the short term, consumption is gradually improving after the epidemic.

In the long run, the company has more than 3,000 stores, and mainly community stores, with significant channel advantages, based on which the company can continue to empower stores, improve individual store revenue and increase the willingness to join businesses to open stores.

The rapid expansion of the franchise store and the expansion of the community group purchase business in the past year and a half have proved the company's business development ability and management ability, and the smooth progress of the two businesses will bring the company's long-term growth. In view of the fact that the epidemic increased the guarantee orders for the company in the first half of the year, and some of the expenses were reduced during the epidemic, we raised our profit forecast for 2022. Considering that the impact of the epidemic on consumption may continue for some time, as a precaution, we slightly downgrade the 2023 profit forecast and increase the 2024 profit forecast. The company's 2022-2024 net profit is expected to be 0.48,0.64 and 86 million yuan, respectively, corresponding to EPS of 0.14,0.19 and 0.25 yuan, respectively. The current stock price maintains a "recommended" rating at 109,81 and 61 times the PE value from 2022 to 2024, respectively.

Risk tips: the company's group purchase business and joining business is not as expected; the effect of sales expenses is not as expected; after the epidemic cycle, the overall consumption level decreases; product quality risk.