Introduction to this report:

H1's main business remains steady, demonstrating the company's business resilience as a regional leader. It is expected to take the lead in benefiting from real estate and policies to promote household consumption in the future.

Key points of investment:

Maintain an increase in holdings. H1's revenue was 774 million yuan/ -1.97%, net profit attributable to the mother was 429 million yuan/ -7.37%, less 435 million yuan/ -1.16%, in line with expectations. Maintain the forecast EPS growth rate of 19/12/11% to 1.25/1.4/1.55 yuan for 2023-25, maintain the target price of 16.55 yuan, and maintain the increase in holdings.

The main business is operating steadily, and net interest rate has increased after deduction. 1) Q1/2 revenue growth rate was -0.23/ -3.68%, net profit growth rate was -0.86/ -13.6%, minus non-growth rate, respectively -1.46%/-0.87%. Q2 fair value changes generated a loss of about 50 million yuan (mainly transactional financial assets), which had a certain impact on return net profit; 2) H1 gross profit margin was 70.67% /-1.04pct, net interest rate 57.28% /-3.45pct, net interest rate of 56.2% /+0.43pct; 3) Expense rate for the period 5.34%/ +0.4pct, with an administrative expense ratio of 4.95% /+0.42 pct, a sales expense ratio of 0.47% /+0.01 pct, and a financial expense ratio of -0.07% /-0.03 pct; 4) Net operating cash flow of 353 million yuan/ -46.8% due to a decrease in net factoring payments.

Continue to consolidate resource advantages and focus on new marketing activities. 1) The company focuses on a large operating system to significantly improve management efficiency, explore store investment resources, optimize each store's business categories, and continuously deepen services; 2) Continuously strengthen traffic creation and traffic monetization, such as live broadcasts, new marketing contests, and large-scale training activities to efficiently empower brands and merchants; 3) Continue to promote the construction and investment promotion of the Fusenmei Tianfu project, and further advance import and export agency business and new retail business.

Continuing to implement high dividends, the current valuation is still underestimated. 1) With the implementation of real estate policies and policies to promote home consumption, it is optimistic that market demand for home furnishings will recover; and the economy in the Chengdu region is improving and consumption is strong, and the company's large-scale decorative building materials distribution enterprise in the southwest region of the company is expected to take the lead in revenue; 2) The company plans to find a dividend of 4 yuan (tax included) for every 10 shares, and a total of 299 million yuan in cash dividends. Consider that the dividend rate may reach 5.7% in the first half of 2022 and twice for the whole year; 3) In addition, consider that the property company will implement dividends twice in 2023; 3) Additionally, consider Asset revaluation The value is high (the construction area of a self-operated store exceeds 1.1 million square meters), and currently only 11 times PE is still underestimated.

Risk warning: offline passenger flow recovery falls short of expectations, dividends falling short of expectations, etc.