Performance Overview: Revenue/profit ratio +6%/34%. The scale effect gradually highlights the company's 23H1 revenue of 6.29 billion yuan, +6.4% year on year; net profit of 260 million yuan, +34.1% year on year; adjusted net profit of 250 million yuan, +23.5% year on year. The adjusted net profit is mainly listing expenses. Among them, the relatively slow revenue growth rate in the first half of the year was mainly due to the company's high sales base as an insurance provider in the same period last year; the high profit increase was mainly due to the obvious optimization of various rates.
Revenue split: Increased B-side e-commerce, direct sales and online channel growth, beautiful split by business: fruit and other food sales revenue of 6.12 billion yuan (+7%), accounting for 97.2%; royalty and franchise revenue of 100 million yuan (+3%), accounting for 1.6%; membership revenue of 50 million yuan (+12%), accounting for 0.8%.
Sales revenue was split by channel: franchise stores were 4.73 billion yuan (+3%), accounting for 77.4%; self-operated stores were 0.2 billion yuan (-22%), accounting for 0.4%; regional agents were 650 million yuan (+16%), accounting for 10.7%; direct sales of 550 million yuan (+35%), accounting for 9.0%; online channels were 160 million yuan (+27%), accounting for 2.5%. Among them, the rapid growth in direct sales is mainly due to the company's strategic expansion of the 2B customer base.
Operating data: Store expansion is progressing steadily. The growth rate of membership coverage is impressive. Stores: 5958 stores = 5945 franchise+13 self-operated. The cumulative number of stores was +308 at the end of the 22nd, compared to 22H1+507. According to the company's public results, it is expected that the current rate of store expansion will be maintained in the next few years.
Members: The total number of omnichannel members reached 79.31 million; of these, there were about 1.41 million paid members, an increase of 174,000 and 326,000 respectively over the end of 22/22H1.
Private brands: 35, 4 new models were launched compared to the end of '22. Among them, the company launched the first NB brand “Sweet Moon” banana in the first half of the year. In the future, it will be distributed through third-party channels other than Baiguoyuan to continue empowering the company's B-side business.
Total retail sales (store+online): 7.93 billion yuan, +2.9% year-on-year.
Profitability: Three fee optimization is obvious, net interest rate is greatly boosted
23H1 gross profit margin was 11.3%, year on year -0.2 pp; net interest rate was 4.0%, +0.9 pp; sales/management/R&D expense ratio was 3.8%/2.3%/1.2%, respectively, and -0.3 pp/-0.3 pp/-0.3 pp. The decline in related cost rates is mainly due to the optimization of personnel in various lines, which is compounded by the effects of the company's operating scale.
Continued optimism: People and stores go hand in hand, and competition barriers for leading fruit retailers accelerate consolidation of people: Continuously strengthen private domain operations and increase repurchase stickiness. As of 23H1, the company had about 25,600 store WeChat groups established by store managers, and the number of followers in the community exceeded 16.4 million, up 14%/27% respectively from the end of '22.
Goods: Increase our own brands and advance high-end processes. The company pioneered a fruit grading system. Currently, sales of signature grade and A grade fruit account for about 67% of retail sales in stores; retail sales of private brand fruit +27% year-on-year, accounting for about 14% of retail sales in stores, +2pp over the previous year. Among them, the average monthly repurchase rate of signature private brand fruit is about 50% higher than that of B-grade fruit, and consumer sentiment is rapidly taking over.
Field: Implement the OMO model to create online and offline integration. The company has 5958 offline stores covering more than 150 cities in 22 provinces, building the largest fruit retail network in the country. Online apps, applets, and e-commerce platforms continue to grow. As of 23H1, 28.8% of orders were placed online, up 1.6 pp from the end of '22.
Profit forecasting and valuation
Baiguoyuan Group has the largest fruit retail network in the country. The upstream market goes into the planting side to increase bargaining power, the downstream high-end and branding process is progressing steadily, the OMO model strengthens customer reach, membership plans increase consumer stickiness, and the three-in-one shopping market restructures the fruit retail ecosystem, with both performance certainty and growth. The company's net profit is estimated to be 4.2/53/680 million yuan in 2023-2025, +29%/28%/28% over the same period last year. The corresponding PE under current market value is 19/15/12 times, maintaining the “buy” rating. Furthermore, the company will be incorporated into the Hong Kong Stock Connect on September 4, so it is recommended to pay active attention.
Risk warning
The recovery of consumption power fell short of expectations; increased competition in the industry; the expansion of new stores fell short of expectations; food safety risks, etc.