The pace of expanding stores is steady, and the profitability is improved.
Steady revenue and high profits: in the first half of 2023, the company recorded revenue of 6.29 billion yuan, an increase of 6.4% over the same period last year, and net profit of 260 million yuan, an increase of 34.1% over the same period last year. During the period, the company's gross profit margin / net profit margin was 11.3% / 4.1%, respectively, compared with the same period last year-0.1pct/+0.9pct. The sales / management / R & D / financial expense rates were 3.8%, 2.3%, 1.2%, 0.3%, respectively, compared with the same period last year. The overall cost delivery efficiency was significantly improved compared with-0.3/-0.3/-0.3/-0.2pct.
The revenue of joining stores grew steadily, and direct sales and online channels increased significantly: 1H23 fruit and other food sales / royalties and franchise revenue / member income / other recorded income of 61.2 billion yuan respectively, compared with the same period last year.
+ 6.7% Universe 3.5% Universe 11.8% Universe 33.2%. According to each distribution channel, the revenue of joining stores / self-operated stores / regional agents / direct sales / online channels respectively achieved 47.3, 0.2, 5.5 and 160 million yuan respectively, compared with the same period last year.
+ 2.8% Rue 22.3% Universe 15.7% Universe 34.7% Universe 27.3%. The remarkable growth of direct sales channels during the period is mainly due to the fact that the company has further expanded its 2B sales network at home and abroad by virtue of its rich fruit supply chain resources.
The number of stores and members continues to increase: in terms of exhibition stores, the company further expands its existing urban store network and continues to infiltrate into low-line cities. As of June 30, 2023, the company had 5958 stores, a net increase of 308 over the end of last year. Among them, the number of franchise stores / self-operated stores managed by the company was 4795max 1150 respectively, compared with 6 at the end of last year. In terms of member operation, the number of corporate members and paid members has increased steadily. During the period, the number of company members / paid members reached 7931 / 1.14 million respectively, 18.0% higher than + 7.1% at the end of last year, and the member income was 74.887 million yuan, + 11.8% compared with the same period last year.
Actively promote its own product brand strategy: in terms of products, the company successfully launched 4 new product brands in the first half of the year, and as of June 30, 2023, the company has a total of 35 product brands. During the period, the total sales of the company's own-brand fruit increased by 27% over the same period last year, accounting for about 14% of the total retail sales of the hundred Orchard stores, and increased by about 2pct compared with the same period last year. At the same time, the company is committed to expanding distribution channels for its own brands, including 'Sweet Moon' bananas and 'Little fresh Purple' passion fruits, in addition to their own channels, are also open to third-party distributors selected by the company for distribution in the first half of the year. gradually achieve all-channel sales.
Target price of HK $6.46, maintain buy rating: to sum up, we expect that in the second half of the year, the company may continue to accelerate the strategic plan of old city encryption and new city development, and continue to optimize the construction of online and offline integrated sales network. Further consolidate the company's position as the leading fruit chain retail chain in China. Taking into account the company's current industrial chain integration advantages and brand advantages, we expect the company to continue the steady growth trend in the future. In 23-25, the company is expected to achieve a net profit of 3.9 billion 470 million yuan respectively, so the target price is HK $6.46, which is equivalent to 20 times the profit forecast for fiscal year 24, which is 18.1% higher than the current stock price.
Important risks: 1) food safety incidents; 2) store expansion is not as expected; 3) extreme weather, natural disasters, crop diseases, pests and other negative impact on the supply side.