Overall demand recovered slowly in the first half of the year, and the company's revenue was weaker than we expected, but it still achieved steady growth. As the number of member stores covered by the company continues to grow and the economy gradually recovers, we expect revenue growth to pick up to 14% in the second half of the year. We adjusted the 2023E/2024E revenue growth rate to 11%/13%, maintained the “buy” rating, and adjusted the target price to HK$37.

Performance remains resilient, and member store coverage continues to expand. The company's 1H23 revenue was RMB 43.4 billion, up 6.6% year on year; of these, transaction business revenue increased 6.8% year on year, and service business revenue decreased 5.8% year on year. Thanks to the continuous expansion of the sales network in the sinking market, the number of active member stores of 1H23 increased by 18.8% year on year to 77,500; the number of active channel partner customers fell 10.7% year on year to 0.94 million, mainly because the company increased direct access to member stores and reduced its dependence on channel partner customers. The company's SaaS business is growing steadily. The number of SaaS+ subscribers of the company increased 9.4% to 121,000 year-on-year, the payment rate increased to 30.7%, and the SaaS renewal rate reached 68%.

Consumer electronics products are growing strongly, and the growth rate is expected to pick up in the second half of the year. The company achieved strong growth in consumer electronics revenue in the first half of the year, recording revenue of 23.1 billion yuan, an increase of 24.4% over the previous year. It mainly benefited from Apple's business growth, and built more than 500 Apple Preferred Stores and co-built more than 500 stores. As the number of members covered by the company continues to grow and the economy gradually recovers, we expect the company's transaction revenue growth rate to return to 14% in the second half of the year, and consumer electronics may still be the main driver.

Maintain the “buy” rating and adjust the target price to HK$37. Considering the gradual recovery of the economy and the impact of the company's business restructuring, we adjusted the 2023E/2024E revenue growth rate to 11%/13%. We expect the revenue growth rate to pick up in the second half of the year. We are optimistic that the company will benefit from consumption recovery and broad sinking market space. We reaffirm the “buy” rating and adjust the company's target price to HK$37, corresponding to 2023E/2024E 39x/30x P/E.

Investment risk: Industry competition intensifies; profit improvement falls short of expectations.