Matters:
The company released its 23-year semi-annual report, achieving operating income of 43.38 billion yuan, +6.6% year-on-year; adjusted net profit of 245 million yuan, +20.1% year-on-year.
Commentary:
Expand and deepen cooperation with leading brands, and promote industrial upgrading through digitalization. In the first half of the year, the company's trading business revenue was 42.99 billion yuan, +6.8% year-on-year. The company has further strengthened cooperation with brands and brand manufacturers, and the share of the headquarters supply chain has increased to 55%. By category, 1) Consumer electronics revenue was +24.4% year-on-year, creating more than 500 Apple's preferred stores and opening up O2O channels; in addition, cooperation with leading brands such as Lenovo, Dell, and ZTE was further deepened; 2) in the field of agricultural production materials, strategic cooperation was carried out with Muyuan and Migao to jointly build a digital platform; 3) the transportation sector and BYD deepened cooperation with the five provinces of East China and the Northeast region; 4) The field of home building materials reached strategic cooperation with Xinghuai and Zhonglian. In addition, the company also continues to upgrade its industrial trading platform and develop specialized online trading service platforms for different industries, such as a regional industrial innovation service platform for the home appliance sector, a digital platform for the agricultural industry in the agricultural industry, and a vehicle sales and trading service platform for the transportation sector to help implement the supply chain with digital tools.
Service capabilities continue to be strengthened, and member users are growing rapidly and stickiness is strong. In the first half of the year, the company's service business achieved revenue of 340 million yuan, -5.8% year-on-year. By the end of June '23, the company had more than 217,000 registered member retail stores, +13.5%; active member retail stores exceeded 77,000, +18.8%; and had a cumulative total of 121,000 SaaS+ subscribers, +9.4%, including 37,000 paid SaaS+ users, +37.4%. The company continues to promote SaaS+ product upgrades, the stickiness of member retail stores continues to increase, the SaaS renewal rate has reached 68%, and customer satisfaction exceeds 95%.
Profitability increases when costs are reduced and efficiency is increased. In the first half of the year, the company's sales expenses were 620 million yuan, -1.1% year-on-year, with a sales cost rate of 1.4% (yoy-0.11pct); management expenses of 170 million yuan, -14.0%, and management expenses of 0.4% (yoy-0.1 pct); R&D expenses of 50 million yuan, -27.7% of the same period, with a R&D expense rate of 0.1% (yoy-0.05 pct). Expenses have been reduced, and the company's adjusted net interest rate of YOY+0.06pct.
Investment advice: Considering that consumer confidence will take time to recover, we slightly lowered the company's revenue forecast for 23-25 years to 888/1004/116.6 billion yuan (previous value: 985/1251/156.4 billion yuan), +10.6%/13.0%/16.1%; the company achieved remarkable results in cost reduction and efficiency, forecasting 23-25 adjusted net profit of 5.0/6.0/8.1 billion yuan (previous value of 4.9/66/870 million yuan). The “Recommended” rating was maintained by awarding 40XPE in '23, with a target market value of HK$22 billion, corresponding to a target price of HK$39.1.
Risk warning: economic growth falls short of expectations, consumer confidence declines, competition intensifies