FY2023H1 performance overview: FY2023H1 achieved operating income of 710 million yuan / year-on-year-18.7%, mainly due to the decrease in the number of directly operated pubs and the increase in the proportion of franchised stores. The overall gross profit margin is 72.3% Universe 6.3pcts; the net profit returned to the mother is 1.57 billion yuan, reversing the loss compared with the same period last year; and the adjusted net profit is 177 million yuan, turning into a loss over the same period last year.

The number of stores continues to adjust, and Hi Beer Partners plans to launch: the company will open 25 new stores in H1 in 2023, close 139 stores, open-114 stores, and operate 653 stores by June 30, 2023.

As of August 25, 2023, the company's stores continued to adjust to 562. From a city-by-city point of view, as of June 30, 2022, the number of first-tier, second-tier and less than third-tier cities was 63,14max 274 respectively, and the number of stores decreased to 17 / 58 / 40. In terms of proportion, the contraction of stores in first-and second-tier cities is more obvious. According to the business model, as of August 25, 2023, there are 425 / 126 / 11 pubs respectively in the company's direct operation model / franchise model / Hi Beer partner pub. The high beer partnership program launched by the company in June 23, as of August 25, the partners have signed more than 80 contracts. The company will make extensive use of social high-quality resources, reduce the break even point and the threshold of early investment through UE miniaturization, and accelerate the layout of the store network. At present, Hi Beer partner Plan has opened stores with an average daily flat efficiency of about 2.6 times that of 23H1's newly opened stores, which initially reflects the superiority of the model.

Store operations resumed and franchise stores performed better: 2023H1's overall daily pub sales were 8200 yuan, + 14% compared with the same period last year. Among them, the average daily sales of first-tier / second-tier / third-tier taverns and below cities are 0.84, 0.83, 0.79 million yuan, respectively, compared with the same period last year, + 15%, 26% and 0% respectively. The average daily turnover of Zhi Ying tavern / franchised cooperative pub is 0.79 million yuan, and the average daily turnover of Zhi Ying tavern is + 9.7% compared with the same period last year. In terms of opening time, the average daily turnover of new pubs opened before 19 years / 19 years / 20 years / 21 years / 22 years / the first half of 23 years was 1.06x0.96 pounds 0.72 pounds per day, while the average daily turnover of pubs opened before 20 years and those opened in the first half of this year was relatively good.

The change in product structure has led to an increase in gross profit margin, and labor and rental costs have been optimized: in 2023, H1 company's gross profit margin was 72.3%, year-on-year change + 6.3pct. The increase in gross profit margin is mainly due to the increase in the proportion of self-owned alcohol with high gross margin and the reduction of marketing activities. Among them, self-owned drinks / third-party drinks / own snacks and other income accounted for 56.4%, 16.9%, 26.7% and + 1.5/-3.5/+2.0pct, respectively, with a gross profit margin of 79.4%, 55.6% and 68%, respectively, compared with the same period last year. The manpower / rental expense rate of H1 in 23 years was 23.9%, 14.2%, compared with the same period last year, which was mainly caused by the termination of leases and the reduction in the number of employees caused by the optimization and adjustment of direct stores.

Target price 10.1 Hong Kong dollars, maintain the buy rating: after the optimization of stores and the recovery of the consumer environment, the company's overall store operations are expected to continue to recover. In addition, the new Hi Beer Partnership Program is expected to help the company quickly lay out high-quality positions in the market and contribute to the second growth curve. It is estimated that the net profit of 23 / 24 / 25 is 301 million / 429 million / 513 million, corresponding to PE 32.1x/22.6x/18.9x. Adjust the target price to HK $10.1, corresponding to 24-year 25xPE, and maintain the buy rating.