[investment points]

The company has been engaged in communication product marketing services and mobile Internet business for many years, focusing on industrial Internet strategy, adhering to digital distribution and digital retail and service business as the core, and speeding up the pace of digital transformation. Based on the sales of communication products, the company maintains a long-term strategic cooperative relationship with the world's top brands, and continues to expand retail e-commerce and other businesses. In recent years, the company has gradually extended to the upper reaches of the industrial chain, focusing on building the channel operation capacity of new consumer goods brands, starting with the construction of "one network, one platform". Form the development strategy of "1x N" strategic layout and "key business overseas development layout".

The company's expansion of car sales and the joint acquisition of the Wiko brand will contribute to the new growth. In terms of car sales, based on the deep cooperation with Huawei customers, some of its stores have carried out car sales business, through the upgrading of offline stores and the new sales model of "car flash store". Will continue to promote the company and customers of new energy vehicle development strategy landing. Joint acquisition of Dongguan Vico (Wiko brand), the company to achieve upstream own-brand mobile phone layout. Wiko has comprehensive capabilities in R & D, design and manufacturing, and has been ploughing overseas markets for many years. From the perspective of channel merchants' main business and customer resources, the synergy advantage is obvious.

[investment advice]

As the leader of digital retail, the company maintains long-term strategic cooperation with the world's top brands, is channel-based and has a strong ability to expand on the platform. We believe that the company's new business growth point has emerged, with existing major customers to expand car sales and on the shelves of own-brand mobile phones, is expected to bring great flexibility for the company's performance. It is estimated that the company's revenue from 2022 to 2024 will be 734.75 yuan RMB 868.75 pm 103.541 billion yuan respectively, the net profit from the parent company will be 2.13 pm 295pm RMB 642 million, the corresponding EPS will be 0.21 pm 0.29max RMB 0.63 yuan per share, and the PE before the corresponding period will be 0.63 times that of 52-38-17 respectively, maintaining the "overweight" rating.

[risk Tip]

The progress of automobile store expansion is lower than expected.

The demand for new energy vehicles and consumer electronics is lower than expected.

1. Key assumptions

Communication product sales: from 2018 to 2021, the revenue scale of the company's main communications product sales business maintained a steady growth, from 41.05 billion yuan in 2018 to 64.68 billion yuan in 2021, with an annual compound growth rate of 16.36%. In the first half of 2022, the company's revenue from sales of communications products reached 32.33 billion yuan. According to the pace of business sales in the previous second half of the year, we expect revenue from sales of communications products to be 64.66 billion yuan in 2022, which will remain stable compared with the same period last year. With the continued growth of mid-and high-end smartphones, folding screen phones, smart home, smart wearable and other products, the company's revenue from sales of communications products is expected to maintain a growth rate of 5% from 2023 to 2024, with revenues of 646.6 shock 678.9 trillion yuan respectively from 2022 to 2024, and business gross margins of 2.34% 2.49% and 2.42% respectively from 2022 to 2024.

Retail e-commerce: the company's retail e-commerce business achieved revenue of 5.42 billion yuan in 2021, an increase of 43.25% over the same period last year. In the first half of 2022, revenue reached 5.21 billion yuan, a substantial increase over the same period last year. The company accelerates the accelerated layout of the integrated new retail model of online and offline integration, and is expected to grasp the development and changes of the retail industry.

We expect revenue from the company's retail e-commerce business to grow by 45%, 20%, 10% and 5% respectively from 2022 to 2024.

Auto sales: as of June 30, 2022, the company has a total of 1453 Huawei HESR stores, accelerating the layout of auto sales by accelerating the upgrading of existing HESR stores and pop-up store models. It is estimated that in 2022-2024, the company's car revenue will be 0.06 pound, 85.54 billion yuan, 20.832 billion yuan respectively. With reference to the gross profit margin of the major auto sales companies in the industry, we expect that the gross profit margin of the company's car sales business will remain 8% in 2022-2024.

2. Innovation

As the leader of digital retail, the company maintains long-term strategic cooperation with the world's top brands, is channel-based and has a strong ability to expand on the platform. We believe that the company's new business growth point has emerged, with existing major customers to expand car sales and on the shelves of own-brand mobile phones, is expected to bring great flexibility for the company's performance.

3. Potential catalysis

The company's auto sales business is accelerating, and a number of Huawei offline retail stores have reused channels to carry out auto sales business. In addition, the company has taken the lead in Hebei Province to gradually expand through the "car flash store" rapid layout of offline car sales business.