The results for the first three quarters of 2023 are in line with our expectations

The company announced 1-3Q23 results: income 9.187 billion yuan, down 0.3%; return to the mother net loss of 44 million yuan, year-on-year loss reduction; deduction of non-return net loss of 52 million yuan, year-on-year loss reduction, in line with our expectations.

On a quarterly basis, 1Q/2Q/3Q 's revenue is + 1.9%, 0.2%, 0.2%, 3.2%, 0.3%, 0.0%, 1.9%, 0.3%, 0.1%, 2.0%, respectively.

Trend of development

1. Revenue in the first three quarters fell 0.3% compared with the same period last year. Affected by increased competition in the industry and other factors, 1-3Q23 revenue fell 0.3% year-on-year, of which Q3 revenue fell 3.2% year-on-year. From a sub-format point of view, 1) supermarkets: we expect revenue to be under pressure due to increased competition in the industry; 2) department stores: we believe that guest orders return or fall short of expectations, affecting the level of individual stores.

2. 1-3Q23 loss narrowed compared with the same period last year. 1-3Q23's gross profit margin slightly decreased to 24.4% compared with the same period last year. From the expense point of view, the sales expense rate decreased by 1.0ppt to 18.9% year-on-year, and the cost reduction and efficiency continued to advance; the management + R & D expense rate increased to 4.4% compared with the same period last year; and the financial expense rate decreased by 0.2ppt to 0.9% year-on-year.

Under the combined influence, the company's net interest rate increased by 0.8ppt to-0.5% year-on-year, and the non-net interest rate increased by 0.8ppt to-0.6% year-on-year, narrowing the loss.

3. Pay attention to the progress of the company's business transformation. 1) in the aspect of incremental business format exploration, the company continues to promote network innovation, pilot a discount store of "Xiaobai Food Store", build a brand of "Zhongbai Qianshuang" low-fat and healthy food, and develop 20 "Zhongbai Qianshuang" light food restaurants. and initially established Zhongbai supermarket to join the system to improve management, has expanded 8 franchise stores The second is to increase the construction of multiple channels. 1H23's physical group purchase sales increased by 34.46%, and continued to strengthen the core competence building of logistics tripartite business operation, and the tripartite business income increased by 222.53%. 2) in terms of improving the efficiency of internal operations, since 2023, the company has increased the investment and rental efforts of "one project, one strategy" around the stock of assets, and the vacant area of 1H23 Group has been reduced by about 25000 square meters; a breakthrough has also been achieved in reducing costs and efficiency, and 1H23 has increased revenue and saved more than 6000 million yuan.

Profit forecast and valuation

The current stock price corresponds to 0.25 pound 0.24 times the profit forecast of 2023cm, while the current share price corresponds to the profit forecast of 0.23cm 0.31 million yuan. Maintain the neutral rating and the target price of 4.4 yuan, corresponding to 0.24 times the 2023 pound in 2024, which is 1% lower than the current share price.

Risk

Market competition intensifies; passenger flow recovers less than expected.