Incident: Oriental Selection released its 2024 semi-annual report. The company's FY2024H1 achieved revenue of 2,795 billion yuan, a year-on-year increase of 34.4%, realized profit of 249 million yuan during the period, a year-on-year decrease of 57.4%, and adjusted net profit of 509 million yuan, a year-on-year decrease of 15.4%.
Comment:
GMV is growing steadily, and the performance of new channels and proprietary products is outstanding. FY2024H1 achieved a total GMV of 5.7 billion yuan, an increase of 19% over the previous year. According to Xindiao data, the GMV for the company's Douyin channel is about 4.3 billion yuan, and the construction of new channels such as Taobao and self-operated apps has achieved remarkable results. The company's FY2024H1 e-commerce business achieved total revenue of 2.41 billion yuan, an increase of 36.6% over the previous year, of which the revenue of proprietary products reached 1.9 billion yuan, +90% year-on-year. Proprietary products accounted for 33% of GMV, an increase of 12 pcts over the previous year. In addition, the company's sales expense rate/ management expense rate/ R&D expense ratio were 20.0%/5.1%/2.7%, an increase of 9.0 pcts/2.1pcts/0.4 pcts over the previous year, mainly due to the increase in related employee costs, Internet technology system and application investment, and equity incentive costs brought about by the development of the live e-commerce business.
Continue to promote supply chain construction and build characteristic categories for cultural tourism products. The company continues to promote supply chain construction. On the one hand, it continues to upgrade its warehousing capacity, and on the other hand, it has a rich team structure. As of November 30, 2023, the total number of self-operated product and live e-commerce teams reached 1,587 people, including 643 supply chain and product teams, and 264 self-operated SKUs. In addition, the company is also actively developing cultural tourism products. According to app data, the main promotion of cultural tourism projects such as the 3,899 yuan Dubai Abu Dhabi 6-Day Tour has sold 2,200+. Combined with the company's cultural communication brand attributes and mature experience in live broadcasts, cultural tourism products are expected to become the company's specialty products and form good collaboration with the parent company's business.
He and Hui's data performed well, and they continue to be optimistic about the company's growth. According to Xindiao data, as of 1/23, the average daily GMV with Huihui began broadcasting was over 48 million. The main products brought in were from third parties. The core categories were food and beverages with the same main name. The leading products included magazines, milk powder, iron pots, lamb, etc., all with sales reaching more than 10 million. Previously, the company announced the sale of the education business to New Oriental Group at a consideration of 1.5 billion yuan. In the future, it will focus on its own products and live e-commerce business layout. We continue to be optimistic about the company's future growth in cross-platform development, the establishment of its own brand & membership system, and live e-commerce going overseas.
Investment advice: The company's net profit for FY2024/2025/2026 is expected to be 5.54/854/971 million yuan, respectively, a year-on-year change of -43%/+54%/+14%, corresponding PE is 41x/27x/23x, adjusted net profit is 1,027/11.25/1,192 billion yuan, a year-on-year change of -3%/+10%/+6%, corresponding PE is 22x/20x/19x, maintaining a “buy” rating.
Risk warning: GMV growth falls short of expectations, consumer demand falls short of expectations, traffic costs increase