The company released its semi-annual report for 2023. 1H23 realized 16.332 billion yuan in income, down 4.54% from the same period last year; the net profit returned to its mother was 327 million yuan, reversing losses over the same period last year, and deducting 273 million yuan in non-return net profit. The diluted EPS is 0.18 yuan, the weighted average return on net assets is 1.84%, and the net operating cash flow is 1.913 billion yuan, an increase of 18.35% over the same period last year.

Brief comments and investment suggestions.

1. In the first half of the year, the income of 16.332 billion yuan decreased by 4.54%, and the comprehensive gross profit margin increased by 26.56% 3.23pct. Of this total, 2Q's revenue of 6.845 billion yuan increased by 0.33% over the same period last year. In the first half of the year, 151 new stores and 138 closed stores were opened, including supermarkets, convenience stores and professional monopolies, including 128 new supermarkets.

(a) Sub-format, through the continuous transformation of "one store, one policy" through cutting into accurate market segments, the revenue increased by 42.22% to 721 million yuan, and the gross profit margin increased by 4.85pct to 26.88%. The shopping center format is committed to stock upgrading, quality improvement and efficiency, with revenue growth of 46.62% to 1.06 billion yuan and gross profit margin increased by 16pct to 42.97%. OUTLETS chose the opportunity to develop high-quality products at the same time. Its revenue increased by 56.36% to 699 million yuan, and its gross profit margin increased by 10.54pct to 75.37%.

(B) Sub-region, income in East China decreased by 4.57% to 14.971 billion yuan, gross profit margin increased by 3.42pct to 24.02%, accounting for 94.05% of income.

2. During the first half of the year, the expense rate was reduced by 0.22pct to 22.5%. Among them, the sales expense rate increased by 0.13pct to 15.54% compared with the same period last year; the management expense rate increased by 0.1pct to 6.9% compared with the same period last year; the financial expense of RMB 310000 decreased by 77.54 million yuan compared with the same period last year, mainly due to the increase in interest income; the R & D expense rate increased from 0.01pct to 0.06% compared with the same period last year; and the overall period expense rate was reduced by 0.22pct to 22.5%.

3. The net profit of returning to the mother in the first half of the year was 327 million yuan to reverse the loss compared with the same period last year. The net investment income in the first half of the year was-10.86 million yuan, a decrease of 114 million yuan compared with the same period last year; the fair value change income was 47 million yuan, an increase of 68.41 million yuan over the same period last year, mainly due to changes in the fair value of financial products; asset impairment losses rushing back to 690000 yuan. In addition, the profit and loss of asset disposal was 25.14 million yuan, a decrease of 2.22 million yuan compared with the same period last year, the effective tax rate was 48.11%, and the profit and loss of minority shareholders was-8.92 million yuan, a decrease of 34.78 million yuan over the same period last year. In the end, the 1H23 net profit was 327 million yuan, of which 2Q was 116 million yuan, and 1H23 was 273 million yuan, of which 2Q was 80.61 million yuan.

4. store transformation, efficient operation, and vigorously develop the economy of the first store. Xijiao Shopping Center through art, culture, IP, combined with the concept of brand, prepare and do a good job in opening activities; first Yaohan promotes facade renewal, 1F-2F plans to gradually complete cosmetic adjustment and opening this year, famous products are gradually upgraded, 9F catering will be fully opened in December 2023; Qingpu Aolai optimizes business layout, promotes brand energy level, and promotes the reconstruction of B9 and B10 according to the planned node. Bailian ZX fun site opened on January 15, 2023, positioning the first commercial body focusing on two-dimensional culture in China, introducing 13 stores in China and 6 stores in Shanghai.

Maintain judgment of the company. We believe that the company as a commercial leader in Shanghai, department stores, shopping malls, Olai, supermarkets, professional stores and other forms of collaborative operation, brand and scale advantages are significant. In recent years, the company continues to promote the upgrading of department stores and shopping centers, and Olai maintains the leading position in the country; supermarkets mainly expand outlets and stores to increase efficiency, reduce losses and improve efficiency. We expect that with the gradual pick-up of consumer demand, the company is expected to fully accept the recovery dividend and bring better performance flexibility by virtue of the rich offline experience and the scale advantage of multi-format coordination.

Update the profit forecast. It is estimated that the net profit from 2023 to 2025 is 676 million yuan, 786 million yuan and 965 million yuan respectively, an increase of-1.2%, 16.3% and 22.7% over the same period last year. Give the company 0.8-1 times PS in 2023, corresponding to the reasonable value range of 14.65-18.31 yuan, to maintain the "better than the big market" investment rating.

Risk tips: increased competition, e-commerce diversion, the new store training period lengthened, the upgrading effect of the old store is not as expected.