This report is read as follows:
2023H1 retail and franchise to achieve rapid growth, the apparent growth slowdown is mainly due to the strategic abandonment of net sales business, the logic of gross profit margin increase is gradually realized to maintain the overweight rating.
Main points of investment:
Maintain the overweight rating. 2023H1 realized income of 4.261 billion yuan (+ 25.7%), net profit of 139 million yuan (+ 24.7%), net profit of 132 million yuan (+ 24.6%), of which 2023Q2 realized income of 2.189 billion yuan (+ 21.4%), net profit of 7.45 billion yuan (+ 20%), and net profit of 7.21 billion yuan (+ 35%). The performance was slightly lower than expected. Considering that the number of stores opened by the company is expected to increase in the second half of the year, maintaining EPS0.74/0.98/1.31 yuan in 2023-2025, maintaining the target price of 24.27 yuan, corresponding to 2023 PE33X, maintaining the overweight rating.
Retail and franchise to achieve rapid growth. (1) 2023H1 retail business achieved revenue of 3.809 billion yuan (+ 29.43%), achieving rapid growth; (2) other businesses except retail (wholesale, promotion, etc.) achieved revenue of 452 million (+ 1%), of which the franchise business grew by 70%, but the overall income growth slowed down because the company abandoned pure wholesale business in 2023.
The logic of raising gross profit margin is gradually realized. 2023H1's gross profit margin is 30.89% (+ 1.27pct), not only because retail sales grow faster than wholesale, but also because gross profit margins of all categories have improved. (1) the gross profit margin of retail business is 31.09% (+ 0.83pct), which is expected to be mainly due to the increase in economies of scale and the increase in the proportion of private brands with high gross margins, with 2023H1 private brands accounting for 13% (+ 2pct). (2) Gross profit margin of non-retail business (wholesale, promotion, etc.) + 3.8pct.
The speed of self-construction is in line with the annual plan, and the number of mergers and acquisitions is expected to increase in the second half of the year. As of 2023H1, there are 3868x2464 direct sales / franchise stores respectively, of which 333 are 2023H1 self-construction, M & An and franchise, respectively. The speed of self-construction is in line with the annual plan, and the speed of M & An is slightly slower.
Tianshili project is carried out normally and is expected to bring performance contribution after the statement.
Risk hint: the market competition aggravates the risk, and the prescription outflow is less than expected.