Key points of investment:
The company announced the 2023H1 semi-annual report, and the performance was in line with expectations. According to the company announcement, 1) The company achieved revenue of 46.545 billion yuan in 2023H1, an increase of 1.12% over the previous year. Net profit to the parent group was 319 million yuan, a year-on-year decrease of 21.78%. Non-net profit of 296 million yuan was deducted from the mother, a year-on-year decrease of 22.83%. Profit declined year over year, mainly due to increased cost investment up and down the industrial chain in the process of coping with challenges, and the overall gross margin of the industry declined. 2) The company's 23Q2 achieved operating income of 21,546 billion yuan, a year-on-year decrease of 1.99%; realized net profit of 144 million yuan, a year-on-year decrease of 30.39%; realized non-net profit deduction of 129 million yuan, a year-on-year decrease of 30.58%.
The digital upgrading of channels helps increase brand value, and the “domestic+overseas” dual cycle promotes market development. According to the company's announcement, the company continues to deepen the digital transformation and upgrading of channels and build a new retail infrastructure platform integrating distribution and retail. The 2C retail business accounts for more than 1/3 of revenue. The company insists on improving the Aishida smart distribution system and digital center, and building a new media operation team to achieve intelligent management of all links from general generation to customer to store to consumer; business operation and retail capabilities such as Honor and Samsung continue to be strengthened. The number of customers directly managed by the company's Honor business team increased by more than 60% year on year, and channel sales volume increased 23% year on year in the first half of the year. At the same time, the company continued to expand its new retail channel network, opening self-operated stores on various platforms such as Tmall, JD, and Douyin, etc., and the number of self-operated stores reached 40. At the same time, the company adheres to a market development strategy where domestic and foreign business cycles promote each other. At home, the company has created a closed loop of digital consumer operations through competitive advantages through channels such as digital smart distribution platforms and national T1-T6 omni-channel sales branches. Overseas, Honor received authorization from the Honor brand in many Southeast Asian countries and regions, achieved another breakthrough in sales share and market position in the Hong Kong market, China, and won the “HONOR High-End Product Breakthrough Award”. In the first half of the year, the overseas business achieved a sales scale of over 3.6 billion yuan, an increase of 49.2% over the previous year.
Implement revenue growth and insurance control, optimize expenses and improve operating efficiency. According to the company's announcement, the company has long insisted on being profit-oriented, implemented measures to increase revenue and efficiency, deepened the company's omni-channel refined operation capabilities, further exploited the company's brand value and resource integration capabilities, and continuously improved operating efficiency. Net cash flow from operating activities in the first half of the year was +31.39%, and gross profit margin on sales was 2.95%, and -0.22pct year on year. The company's cost rate during the period was 1.73%, -0.06 pct over the same period last year. Expense rates have been continuously optimized, and risk resistance has improved. The sales/management/R&D/finance expense ratios were 1.29%/0.29%/0.04%/0.11%, respectively, with year-on-year changes of -0.03/+0.02/+0.02/-0.07pct, respectively. Thanks to the company's continuous improvement in operating efficiency and strict control of core operating factors and indicators, the sales expense ratio and financial expense ratio have improved. Financial expenses fell 36.14% year on year in the first half of the year, mainly due to strengthening the monitoring and management of existing accounts receivable and commodity inventories, further strengthening account risk management and control capabilities, continuously improving operating efficiency, and helping the company build core competitiveness. Under comprehensive influence, 23Q2 achieved a net profit margin of 0.67% over the previous year, -0.27 pct; the non-net profit margin after deduction was 0.60%, -0.25 pct over the previous year.
Explore new fields to expand performance growth points, and the partnership mechanism unleashes team vitality. According to the company's announcement, while focusing on its main business, the company continues to expand its own brands and new development areas. The company and Xingji Meizu jointly built a three-level channel system of “Meizu Integrated Experience Center”, “Meizu Experience Center” and “Meizu Authorized Experience Store”. A total of 193 stores were built in the first half of the year.
“Tea Xiaokai” covers 120,000 outlets across the country, and its monthly sales volume has exceeded 10 million yuan. The sales volume of “UOIN” in the first half of the year reached 2.5 times that of the previous year. The “ROZU/Rongzun” main product entered the Tmall massager bestseller list and top reviews list. In the second quarter, sales increased by more than 110% year-on-year. At the same time, it has made continuous achievements in the field of new energy vehicles, building a “1+N” three-dimensional NEV sales and service network. A total of 2 delivery centers and 13 retail experience stores have been built. The company's subsidiary Yamaki New Energy's revenue for the first half of the year increased by more than 113% over last year. Furthermore, “partner manpower” is one of the company's core values, and the company's subsidiary Youyou.com successfully obtained approval for listing on the National Small and Medium Enterprises Share Transfer System.
Promote the continuous fission and upgrading of enterprise organizations and capabilities to achieve further value creation. At the same time, the company places importance on shareholders' return on investment. On May 9, 2023, the company passed a resolution to distribute a cash dividend of 5 yuan (tax included) to all shareholders for every 10 shares. Calculated at the closing price of the day, it shows that the company attaches importance to giving back to shareholders and long-term returns to capital market investors.
Adjust profit forecasts and maintain “buy” ratings. The company is mainly engaged in 3C digital, FMCG, communication and value-added services with mobile phones as the core, and the distribution and retail of new energy vehicles. It has a high degree of digitalization, deep channel barriers, and continues to empower cooperative brands.
Based on its existing business, the company promotes its own brand strategy in various fields and lays out new performance growth points. Considering that the recovery of the consumer electronics terminal market is still slow, we lowered our profit forecast. We expect the company's EPS for 23-25 to be 0.66/0.79/0.94 yuan respectively (previous value 0.80/1.00/1.19 yuan), and the corresponding PE is 11/9/8 times, maintaining the “buy” rating.
Risk warning: mobile phone sales fall short of expectations; new brand expansion falls short of expectations; industry competition intensifies.