Performance review

1H23 performance is in line with our expectations

The company announced half-year 2023 results: 1H23 achieved revenue of 3.627 billion yuan, an increase of 9.9% over the same period last year; net profit of 250 million yuan, an increase of 139.4% over the same period last year, in line with our expectations; deducting 127 million yuan of non-return net profit, an increase of 145.9% over the same period last year. On a quarterly basis, Q1/Q2 revenue increased by 3.3% over the same period last year by 18.9%, and net profit from home increased by 6.3% by 1029.6%, deducting non-net profit by + 25.8% / turning losses into profits.

Trend of development

1. 1H23 revenue increased by 9.9%, and the department store business format recovered quickly. The company's 1H23 revenue increased 9.9% year-on-year, of which Q2 returned to speed up 18.9% year-on-year. In terms of business formats: 1) Department stores (including home appliances): the income reached 1.32 billion yuan, up 14.0% from the same period last year, and we expect it to be mainly driven by the recovery of offline passenger flow; 2) the supermarket industry: realized income of 1.87 billion yuan, down 1.9% from the same period last year. Industry competition continued; 3) Agricultural products trading market: the company increased its efforts to revitalize the countryside, achieving income of 220 million yuan, an increase of 15.4% over the same period last year. In terms of stores, 1 electrical store was cleared during the 1H23 period, with a total of 240stores at the end of the reporting period, and 24 department stores / supermarkets / electrical appliances respectively.

2. The reduction of cost and efficiency will continue to be promoted, with 1H23 deducting non-net interest rate and increasing 1.5ppt. The company's 1H23 gross profit margin reached 27.8%, down 1.6ppt from the same period last year, including department store / supermarket / agricultural product trading market gross profit margin respectively-5.8/+0.3/+2.0ppt. In terms of period expenses, the rate of sales expenses was reduced to 6.2%, the rate of management + R & D expenses was reduced by 1.9ppt to 13.8%, and the rate of financial expenses was reduced by 0.2ppt to 0.7%. In addition, about 107 million yuan was collected for housing settlement during the reporting period, increasing non-recurrent income.

Under the combined influence, the company's parent net interest rate increased by 3.7ppt to 6.9%, and the non-net interest rate increased by 1.9ppt to 3.5%.

3. Pay attention to the effectiveness of the company's business transformation in the promotion of cross-border trade. The company disclosed its overseas investment announcement in July, and Anhui Baidayi Mall, a wholly-owned subsidiary, plans to jointly invest with three companies, including Hefei International Inland Port Development Co., Ltd., to set up "100 Cross-Border bonded Electronic Commerce Co., Ltd." with a registered capital of 12 million yuan. In the follow-up, the company will be based on cross-border commodity sales to provide consumers with a high-quality experience that can "buy the world" at home. We believe that the company's active practice of cross-border trade plate is expected to further strengthen the commodity power of department stores. At the same time, contribute new business growth points, continue to pay attention to the progress of the company's business transformation.

Profit forecast and valuation

Taking into account that the company's 1H23 asset disposal income of 106 million yuan exceeded expectations, accordingly raised the 2023 return net profit forecast of 50% to 318 million yuan, but kept the 23-year deduction of non-net profit forecast of 212 million yuan unchanged; taking into account the continued transformation of the company, cross-border trade is expected to contribute to incremental performance, raise the 2024 return net profit forecast of 10% to 253 million yuan, the current stock price corresponds to 202324 14 price 17 times Phand E. Maintain the outperform industry rating, taking into account the high level of market attention to the company's cross-border trade business, the valuation center has moved up, raising the target price by 18% to 6.15 yuan, corresponding to 2023 Universe, which has 10% upside space.

Risk

Competition in the industry intensified, the transformation was less than expected, and the regulation of real estate was tightened.