1H23 Profit Exceeded Our Expectations
The company announced 1H23 results: the company's revenue was 43.4 billion yuan, up 6.6% year on year, mainly due to macro-level disturbances; adjusted net profit margin of 250 million yuan, corresponding to the adjusted net profit margin of 0.6%, higher than our expectations of 180 million yuan, mainly due to increased gross margin in all sectors and optimization of operating leverage.
Development trends
Trading business: 1H23 Trading business revenue was 43 billion yuan (same increase 6.8%); gross margin of trading business increased from 2.2% of 1H22 to 2.3% of 1H23. Among them, gross margins of consumer electronics, agricultural materials, and transportation all increased year-on-year. Looking ahead to 2H23, we expect the 3C market to continue to drive the growth of the trading business, and that the revenue from travel, home appliances, and agricultural materials may stabilize. At the same time, with the optimization of the revenue structure and the improvement of supply chain efficiency, the company expects the gross margin of the trading business to increase steadily within 3-5 years.
Various categories were affected by short-term fluctuations: 1H23, the consumer electronics and transportation sectors achieved growth (same increase of 24.4% and 3.5%, respectively), and the home appliance sector remained the same year-on-year; the agricultural sector was affected by price inversion, and revenue fell by 19%; revenue from household building materials and beverages fell by 6% and 16%, respectively;
The size of member stores and activity rate increased steadily: 1H23. The total number of registered member retail stores of the company was 218,000 (same increase of 13.5%), including 78,000 active member retail stores (same increase of 18.8%). The activity rate reached 36%, an increase of 1.6ppt over the same period last year;
Supply chain efficiency has improved: 1H23's leading brand cooperation in the main segments of the company has deepened, and the share of the headquarters supply chain has also increased by 7ppt to 55%; at the same time, channel revenue contribution has been further reduced, and the share of small store revenue has increased to 36% (less than 30% in the same period last year), promoting gross margin optimization.
Service business: 1H23, service business revenue was 340 million yuan (same decrease of 5.8%), of which SaaS+ business revenue was 270 million yuan (same increase of 2.5%), mainly due to pressure on ARPU under the promotion model; gross margin of service business increased from 75% of 1H22 to 84% of 1H23, mainly due to the increase in the share of independent delivery of merchant solutions and optimization of gross margin. Looking ahead, we expect the Group's gross margin to be gradually optimized as the share of service business revenue increases.
The SaaS+ payment rate has increased: 1H23, the number of SaaS+ users reached 121,000 (same increase of 9.4%), and the payment rate increased to 30.7% (24.4% in 1H22).
AI empowers SaaS+ product upgrades: The company promotes AI+ digital scenario construction, is based on Huitongda's self-developed vertical model, and empowers member stores with intelligent shopping guide, marketing planning, and digital human services.
Profit forecasting and valuation
The company is currently trading at a non-GAAP price-earnings ratio of 27 times/20 times in 2024/2024. Considering that the company's revenue growth rate will be relatively flat during the consumption recovery process, we lowered our revenue forecast for 2023 and 2024 by 8% and 15% to 907 billion yuan and 104.3 billion yuan. Considering the optimization of operating leverage, we raised our profit forecast for 2023 by 9% to 560 million yuan. Considering the slow revenue growth in 2024, we lowered our profit forecast for 2024 by 3% to 740 million yuan. We maintained our outperforming industry rating and lowered our SOTP-based target price by 15.7% to HK$42. The adjusted price-earnings ratio corresponding to 2023/2024 was 37/27 times, and there was still room for an increase of 37.3%.
risks
Affected by the epidemic, macro-consumption has weakened, and competition in the sinking market has intensified.