[Investment points]
The company released its 2023 mid-year report. 2023H1 achieved operating income of 43.377 billion yuan, an increase of 6.6% year-on-year; realized net profit of 245 million yuan, or 118.0% year-on-year; achieved adjusted net profit of 245 million yuan, or 20.0% year-on-year.
Supply chain capabilities are steadily improving, further deepening brand cooperation and expanding categories and business chains.
2023H1's trading business revenue was RMB 42,990 million, an increase of 6.8% over the previous year. We continue to focus on six major industries and enrich the matrix of leading brands in various industries, such as Apple, Lenovo, and Dell in the consumer electronics industry, BYD in the transportation industry, Muyuan and Mikao in the agricultural production materials industry, and Xinghuai and Zhonglian in the home building materials industry. It has accumulated links to more than 1,000 high-quality upstream brand manufacturers, and the share of the headquarters supply chain continues to rise to 55%. Downstream promotion is to implement a B2F model that requires mining, refinement, and fixed production, so as to reduce costs and increase efficiency in the industrial chain, and build a flexible supply chain. The total number of registered member retail stores exceeded 217,000, an increase of 13.5% over the previous year; there were more than 77,000 active member retail stores, an increase of 18.8% over the previous year.
Member service capabilities continue to increase. 2023H1's service business revenue was 343 million yuan, down 5.8% year on year. Among them, store SaaS+ subscriptions increased steadily over the same period, with a cumulative total of 121,000 SaaS+ subscribers, up 9.4% year on year; 37,000 paid SaaS+ users, up 37.4% year on year; member retail store stickiness continued to increase, SaaS renewal rate reached 68%, and customer satisfaction exceeded 95%. At the same time, through the development of intelligent shopping guide AI, marketing planning AI, and Qianorange digital people, it meets user needs. Merchant solutions declined significantly compared to the same period, mainly due to business strategy adjustments, focusing on digital solutions using independent technology product lines, and reducing some low-margin precision marketing.
Profitability has increased significantly. On the profit side, 2023H1 achieved gross profit of 1,294 million yuan, an increase of 7.9% over the previous year; gross margin was 3.0%, an increase of 0.1 pct over the previous year. It is mainly due to changes in the trading business structure and an increase in the gross margin of the service business. On the cost side, the sales/management/R&D expense ratio was 1.44%/0.40%/0.11%, respectively, and the year-on-year changes were respectively
-0.11pct/-0.09pct/-0.05pct, mainly due to cost reduction and efficiency increase, cost improvement in all aspects.
[Investment advice]
The company is deeply involved in the sinking market, operating with member retail stores as the center, consolidating buying+sales, supply chain trading business, and SaaS services. We expect the company's operating income from 2023-2025 to be 871/944/102 billion yuan, and net profit to parent to be 4.9/55/ 6.1 billion yuan. EPS was 0.9/1.0/1.1 yuan/share, and the corresponding PE was 31/28/25. It was covered for the first time, and was given a “increase in holdings” rating.