The company released its semi-annual report for 2023:23H1 The company's revenue was 16.332 billion yuan/YoY -4.54%, achieving net profit of 328 million yuan and net profit of 273 million yuan after deducting non-return net profit of 273 million yuan, turning loss into profit over the previous year. Looking at the split, 23Q2 achieved revenue of 6.845 billion yuan/YoY +0.33%, net profit attributable to parents of 116 million yuan, net profit of non-attributable income of 81 million yuan, net profit of non-attributable income of 81 million yuan. Profit was corrected year-on-year.

Revenue recovery drives profitability restoration and period rate optimization. (1) Profitability: 23Q2 The company's gross margine/net profit margin was 28.66%/1.70%, up 5.56 pct/5.68 pct from the previous year, and the return net interest rate changed from negative to positive. After the epidemic, as offline consumption recovered, the company's profitability picked up markedly. (2) Expense rate: 23Q2 The company's sales/management/R&D/financial expense ratio was 18.46%/8.25%/0.07%/0.01%, year-on-year change -0.28pct/-1.28pct/+0.01pct/-0.54pct. 23Q2 Operation repairs combined with strict cost control, and the company's cost rate declined year on year.

The revenue and gross margin of the comprehensive department store business increased significantly, while the Ole business maintained a strong recovery trend.

23Q2 The company's department store/shopping center/Ole sales revenue was 339/508/326 million yuan, up 165.49%/195.03%/101.87%; gross margin was 30.06%/43.97%/73.16%, up 10.35pct/31.81pct/15.67pct. As the impact of the epidemic gradually weakened, there was a significant recovery in overall department store revenue and gross margin. Benefiting from the impact of the low epidemic base in East China in 22Q2, the revenue and gross margin of the Ole business increased more than 23Q1 in 23Q2, continuing to perform well.

Accelerate the construction of key projects and create more commercial landmarks. 23H2 plans to promote the construction and opening of the Bailian Xijiao Shopping Center, the renewal of the façade of the No. 1 Yaohan, the update and upgrading of the Oriental Commercial Building flagship store, and the optimization of the Qingpu Olay brand portfolio. It will focus on enhancing the influence of commercial landmarks and focus on integrated development in the fields of commerce and culture, art, fashion, and digital.

Profit forecast and investment suggestions: The company's net profit for 2023-25 is estimated to be 697/813/922 million yuan respectively. The current market value corresponding to PE 23-25 is 30X/26X/23X. The judgment of a reasonable value of 1,480 yuan/share remains unchanged, and the “buy” rating is maintained.

Risk warning: macroeconomic fluctuations; the epidemic exceeds expectations; increased competition; low project construction expectations, etc.