Overview of events

The income / return net profit / deduction of non-return net profit / net operating cash flow of 2023H1 is 8.98%, 0.96 and 0.90, respectively, with an increase of 0.02%, 3.42%, 1.27% and 51.88%, respectively, compared with a decrease of 14%, 50%, 52%, 21% in 21H1. The lower growth rate of net profit than income is mainly due to the increase in expenses; the higher net operating cash flow is mainly due to the increase in depreciation and amortization. The income / return net profit / deduction non-return net profit of 2023Q2 company is respectively 4.47, 0.47, 0.45 million yuan, an increase of 13.52%, 26.50, 38.75%, compared with 21H1, a decrease of 11%, 52%, 53%.

Analysis and judgment:

Offline joining channels rebounded strongly, and single-store shipments returned to the pre-epidemic level. (1) from a sub-channel perspective, 23H1 proprietary / e-commerce / distribution / other income is RMB 6.07 million, up 0.4%, 2.0%, 18.0%, 49.5%, respectively, compared with 21H1, down 18.9%, 1.1%, 7.6% and 14.6% respectively. Offline franchise stores were repaired, direct sales were basically flat, special stores and domestic purchases decreased significantly; e-commerce accounted for 25.6% of revenue, down 0.4PCT compared with the same period last year (2) in terms of endogenesis and extension, the number of self-operated / franchised stores of 23H1 is 423Universe 88 respectively, with a net opening of 3 stores in the first half of the year, an increase of 4.4% over the same period last year and 2.3% increase over the same period last year, and the area of a single store is 179%, 129%, 1.2% and 7.4% respectively. It is estimated that the shipment of direct stores / franchisees in half a year is 1.43 million yuan, an increase of-4% and 15%, respectively, compared with 21H1 growth of-22% and 6% respectively. For half a year, the average effect of direct operation / franchise is 0.80ppm / kg, the year-on-year increase is-5% and 7%, compared with 21H1, it is down 27% and 4% respectively. (3) from a regional point of view, the income of East / North China / South China / Central China / Northwest / Northeast / E-commerce / overseas is 1.590.59, 0.59, 0.32, 0.65, 0.64, 0.24, 0.28, 0.11 million, 5.9%, 1.8%, 10.8%, 7.8, 17.3, 13.4, 2.0, 8.8, 8.8% 13.4, 2.0, 8.8% 8.8%, 13.4, 2.0, 8.8% respectively. The main place of sales is only East China to achieve positive year-on-year growth.

The increase in gross profit margin is mainly due to the substantial increase in gross profit margin. 23H1 gross profit margin of 71.15%, year-on-year increase of 1.22 PCT 23Q2 gross profit margin of 72.14%, year-on-year increase of 1.89PCT. (1) from a sub-channel point of view, the gross profit margin of proprietary / e-commerce / distribution / other sales is 77.26% / 55.48% / 69.34% / 64.90% respectively, which is higher than that of 0.58/-0.07/19.35/-6.21PCT year-on-year. The gross profit margin of joining is basically the same as that of 21H1. We judge that it is mainly due to the great improvement in inventory removal by franchisees. (2) South China, southwest and northeast regions improved significantly, East / North China / South China / Central China / Northwest / Southwest / Northeast / e-commerce / overseas gross profit margin increased year-on-year-0.25/0.67/2.92/1.55/1.63/2.87/3.82/-0.07/-2.18PCT.

The increase in net interest rate is lower than that of gross margin mainly due to the increase in expense rate and the reduction of government subsidies. (1) the 23H1 homing net interest rate was 10.67%, which decreased 0.38PCT compared with the same period last year, and the increase in homing net interest rate was lower than the gross profit margin. 1) the increase in sales / management / R & D / financial expense rate was 0.78, 0.32, 0.32 and 0.08 0.51PCT, 2) the proportion of other income decreased, mainly due to the decrease in government subsidies. 3) the proportion of impairment loss decreased 0.51PCT, mainly due to the reversal of bad debt losses on accounts receivable. 4) the combined proportion of investment, fair value change, asset disposal and non-operating net income decreased by 0.16 0.18PCT. 5) income tax rate decreased by 0.27 PCT. (2) the 23Q2 homing net interest rate is 10.46%, which is higher than the same period last year. The increase of the homing net interest rate is lower than the gross profit margin, which is mainly affected by the reduction of government subsidies and the increase of sales expenses and taxes.

The number of inventory turnover days is higher. The inventory of 2023H1 Company was 702 million yuan, an increase of 20% over the same period last year, mainly due to the increase in stock. The turnover days of inventory was 516 days, an increase of 119 days over the same period last year; accounts receivable was 161 million yuan, down 13.36% from the same period last year; the turnover days of accounts receivable was 35 days, down 3 days from the same period last year; accounts payable was 106 million yuan, down 55.87% from the same period last year; the turnover days of accounts payable was 131 days, down 25 days from the same period last year.

Investment suggestion

According to our analysis, the future space of the company lies in: (1) multi-brands still have space to expand offline stores in the future; (2) there is still room for improvement in online share; (3) the company has completed the second generation succession this year, and the digital transformation is worth looking forward to. The 10 million shares repurchased by the company in 22 years will also be used as incentives in the future. To maintain the company's 23-25 revenue forecast of 2.391 million yuan, and to maintain the 23-25 year return net profit forecast of 2.51 million yuan, 3.11 million yuan, 0.81 yuan corresponding to the 23-25 year maintenance of EPS 0.78 pound, corresponding to the closing price of 9.74 yuan per share on August 31, 2023, the PE is 1714x12X respectively, maintaining the "buy" rating.

Risk hint

The risk of shop opening and store efficiency improvement is not as expected; the risk of inadequate design and insufficient supply chain management; systemic risk.