The company released the 2023 semi-annual report. 23H1 achieved operating income of 43.38 billion/ +6.6%, and adjusted net profit of 250 million/ +20.0%. As a leading B2B e-commerce enterprise in the sinking market, the company continues to consolidate its ability to face the sinking market, empowers offline stores through supply chain capabilities and digital construction. The dual core of product transaction+service business drives development, and has broad room for growth. Maintain the “Highly Recommended” rating.
Under a weak recovery, business resilience was highlighted, and performance grew steadily. 23H1 achieved operating income of 43.38 billion/ +6.6%, and adjusted net profit of 250 million/ +20.0%. By business, the trading business segment achieved revenue of 42.99 billion/ +6.8%, accounting for 99.1% of total revenue. Among them, consumer electronics products achieved revenue of 23.1 billion/ +24.4%, mainly driven by sales channel expansion combined with consumer electronics demand and the recovery of manufacturers' production capacity after the pandemic. Affected by the slump in industry segments, agricultural production materials, household building materials, and beverages achieved revenue of 6.75 billion/1.54 billion/850 million, respectively, with a year-on-year ratio of -19.1%/-5.5%/-16.4%. The service business segment achieved revenue of 340,000,000/ -5.8%, of which in-store SaaS+ subscriptions achieved revenue of 270 million/ +2.5%, and merchant solutions achieved revenue of 0.7 million/ -27.6%.
The service business strategy was adjusted, and SaaS+ led to an increase in gross margin. 23H1's gross margin was 3.0%, +0.1 pct year on year, mainly due to changes in trading business structure and increase in service business gross margin. In terms of trading business, mainly changes in category structure have led to an increase in gross margin. In terms of service business, the company made strategic adjustments to merchant solutions, focusing on high-margin projects, and shifting the focus of the software business from joint delivery to independent delivery. The company's high-margin SaaS+ subscription service grew steadily, with 121,000 SaaS+ subscribers at the end of the 23H1 period, 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%.
Sales and marketing cost efficiency has increased, and the overall cost ratio has stabilized. 23H1's sales and marketing expenses were $6.2 million/ -1.0%, accounting for 1.4% /-0.1 pct of revenue. Administrative and other operating expenses were 170 million/ -13.8%, accounting for 0.4% /-0.1 pct of revenue. R&D costs were 50 million/ -27.7%, mainly due to major project investment in digital infrastructure and underlying capacity building in the same period of '22.
Investment suggestions: As a leading B2B e-commerce enterprise in the sinking market, the company continues to consolidate its ability to face the sinking market, empowers offline stores through supply chain capabilities and digital construction. The dual core of product transaction+service business drives development, and has broad room for growth. The company's adjusted net profit for 2023/2024/2025 is estimated to be 5.2/68/870 million respectively, maintaining the “highly recommended” rating.
Risk warning: Consumption recovery falls short of expectations, industry competition intensifies, and there is a risk of loss of customers.