The multi-platform strategy has shown results, and branding continues to advance; the potential of the new live broadcast room can be expected for Oriental Selection 1HFY24 (June-November 23, hereinafter referred to as 1H) to achieve revenue of 2,795 billion yuan (yoy +34.4%), of which the self-operated and live e-commerce business revenue was 2.41 billion yuan (yoy +36.6%); adjusted net profit to mother was 509 million yuan (yoy -15.4%). We believe that the increase in 1H's revenue is mainly due to the strength of sub-accounts such as Beautiful Life and the expansion of new platforms such as proprietary apps and Taobao Live Streaming. Looking forward to the future, we expect that the rapid increase in the share of 2H's own products will drive a month-on-month increase in revenue, and “Walking with Hui” is expected to become a new engine for growth. We expect the adjusted net profit of FY24E-26E to be $1,162/12.05/1,284 billion. Considering that the company's branding operation continues to deepen and there is still great potential for category and customer base expansion, it gives live e-commerce - self-operated/consignment marketing 35x/15x FY25 PE (wind comparable consistent forecast average is 29.82x/13.91x), based on the SOTP target price of HK$31.34.
Maintain a “buy” rating.
Multi-platform expansion helped GMV continue to grow, improving the membership system and binding core users 1H Oriental Selection's total GMV of about 5.7 billion yuan (yoy +18.75%). By platform, the new dib data showed that the GMV delivered by Douyin live streaming fell 11.9% year on year to 4.25 billion yuan, mainly due to the high base for the same period last year, with sub-accounts such as Beautiful Life increasing by more than 70% year on year; incremental GMV mainly comes from newly expanded platforms — launched a self-operated app in July 23, and entered Taobao's live broadcast room at the end of August while expanding user reach. The product palette has been further enriched. The self-operated app launched paid membership in October. According to the results conference, the current number of members is close to 200,000, with an average consumption of about 800 yuan/month. The membership system complements the ever-expanding self-operated product pool, which is conducive to continuously strengthening private domain conversion and increasing repeat purchases.
Proprietary products are gaining strength at an accelerated pace, and brand potential continues to strengthen; as the supply chain capacity continues to improve, self-operated products have accelerated significantly. As of the end of December, the number of self-operated SKUs reached 315, of which 62 were added in a single month, expanding the category from food to daily necessities; brand momentum has strengthened, and shelf scene purchases have increased. Since January, the proportion of self-operated non-live streaming purchases has also effectively stimulated the growth of self-operated GMV; promotion strategies such as self-operated app members, brand day discounts, and shopping festivals have also effectively stimulated the growth of self-operated GMV. Account GMV share of proprietary products Compared to the previous 30% to 43%/62%, the revenue side driving effect is obvious. On the profit side, discounts on self-operated products increased or dragged down 3Q profit margins in November-December, but the average daily GMV has been high (nearly 50 million yuan) since the launch of “Walking with Hui” in January '24. The account mainly focuses on consignment sales, and 2H may contribute a considerable increase in profit.
Selling the education business to focus on e-commerce; going overseas for a long time or exploring e-commerce in December '23, the company announced that it would sell the education business to New Oriental Group at a price of 1.5 billion yuan (expected to be delivered on March 1, '24), and will focus on e-commerce business thereafter. Furthermore, we have seen that the company is recruiting talents related to overseas e-commerce supply chain, operation, marketing, etc., or gradually starting overseas commercialization penetration.
Risk warning: GMV growth falls short of expectations, supply chain construction progress falls short of expectations, loss of core talent, risk of product quality issues, risk of live streaming e-commerce industry policy changes.