2023Q2's revenue was under pressure, and net profit to the parent company declined sharply year on year. We believe that with the improvement of the efficiency of the fresh food supply chain and the optimization of the product category structure, the company's gross margin will continue to rise; as digitization initiatives gradually take effect, the company is expected to reduce costs and increase efficiency. The company was given 0.38x PS in 2023, corresponding to a target price of 4.0 yuan, and maintained a “buy” rating.
Q2 Revenue was under pressure, and losses narrowed year over year. 2023H1, the company's operating income was 42.03 billion yuan, -13.8% year-on-year, mainly because macro-consumption showed a weak recovery trend. At the same time, the company eliminated long-term loss-making stores, which reduced the average number of stores during the period; net profit of 3.7 billion yuan (2022H1: -110 million yuan), mainly due to a 1.6 pcts increase in gross margin, a year-on-year decrease of 640 million yuan in expenses during the period, and a profit and loss of 55.3 billion yuan from changes in fair value generated by transactional financial assets held by the company. .
2023Q2 achieved operating income of 18.23 billion yuan, -15.2% year-on-year, net profit of 330 million yuan (2022Q2: -6.1 billion yuan), net profit of non-attributable net profit of 5.2 billion yuan (2022Q2: -5.3 billion yuan).
Stores are opened with caution, and stores are constantly being adjusted. 2023H1, the company has opened 4 new supermarkets and closed 29 stores; as of 2023/6/30, the company has opened 1008 stores in 29 provinces and municipalities across the country. There are 105 stores that have signed contracts and have not yet opened.
The gross margin increased, and the cost ratio increased. 2023H1, the company's comprehensive gross margin was +1.6 pcts to 22.0% year on year.
By quarter, 2023Q1/2023Q2: +1.6 pcts/+1.7 pcts year on year to 22.9%/20.8%. By product, the gross margin for fresh and processing/foodstuffs (including clothing) was +0.6pct/+2.5pcts to 13.2%/19.1% year-on-year.
In 2023H1, the company's sales expense rate/ management expense ratio was +1.2pcts/+0.4pct to 17.3%/2.7%, respectively. On a quarterly basis, 2023Q1/2023Q2 company sales expense ratios were +0.6/+2.1pcts year on year to 15.3%/19.9%, respectively.
The online business continued to grow, and gross margin reached a three-year high. 2023H1, online business revenue was 7.92 billion yuan, +4.4% year-on-year, accounting for 18.7% of omni-channel main revenue (2022H1:15.7%); gross product margin was the highest in nearly 3 years, thanks to optimized category structure and improved supply chain efficiency. “Yonghui Life”'s self-operated door-to-home business has covered 93.8% of stores (2022H1:93.5%), achieving sales of 4.06 billion yuan (2022H1:
4.02 billion yuan), with an average daily order volume of 295,000 orders (2022H1:2.902,000 orders), and an average monthly repurchase rate of 48.9% (2022H1:51.2%). During the reporting period, the third-party platform-to-home business covered 91.5% of stores (2022H1:86.7%), achieving sales of 3.86 billion yuan, +10.9% year-on-year, and an average daily order volume of 197,000 orders (2022H1:19.9%).
Private brands are growing rapidly, deepening barriers in the fresh food supply chain. 2023H1, private brand sales reached 1.95 billion yuan, accounting for 4.64%, +15.2% year-on-year, and online share of 22.5%. In 2023H1, the private brand supply chain has introduced more than 60 planting bases and innovative R&D source suppliers (34 strategic cooperative suppliers, 13 contract planting and production line underwriting suppliers) to jointly promote innovative research and development of private brands. In the future, the company will continue to focus on user needs and strengthen the creation of popular products and source supply chain construction.
Risk factors: Macroeconomic pressure; declining consumer consumption capacity; increased competition in the industry; digital construction falls short of expectations, improving operational efficiency is limited; store changes are falling short of expectations, and the number of stores continues to decline.
Investment suggestions: Due to weak growth in the number of stores and pressure on single-store performance, we adjusted the company's revenue forecast for 2023-2025 to 86.909 billion/87.90 billion yuan (original forecast was 90.96 billion/93.91 billion/97.45 billion yuan); industry competition intensified, sales expense ratios were expected to increase, and adjusted the attributable net profit forecast for 2023-2025 to 160 million/170 million/2.1 billion yuan (the original forecast was 170 million/180 million/210 million yuan), corresponding to 2023-25 The annual EPS forecast is 0.02/0.02/0.02 yuan, respectively. We anticipate that it will take some time for the company's net profit to return to a reasonable level, so we use the PS valuation method. Referring to the industry valuation level [Wind unanimously expects 2023: supermarkets and convenience stores (CITIC Level 3 Industry Index) 0.50x PS], considering comparison with peers, Yonghui Supermarkets mainly uses the traditional business format of supermarkets, so it gave the company 0.38x PS in 2023, corresponding to a target price of 4.0 yuan, maintaining a “buy” rating.