Key points of investment
Incident: The company's FY2024H1 (2023/6/1-2023/11/30) revenue achieved 2,795 million yuan, yoy +34%, net profit to mother of 249 million yuan, yoy -57%, adjusted net profit of 509 million yuan, yoy -15%, +4% month-on-month, adjusted net profit margin of 18.2%, down 10.7/1.9 pct from month to month, respectively. The company's performance fell short of our expectations.
The live e-commerce business maintained a relatively rapid growth rate, and profit margins declined in stages. FY24H1 achieved growth in its own products and live streaming e-commerce. It has already paid 5.7 billion yuan in GMV, an increase of 19% over the previous year, and achieved revenue of 2.41 billion yuan, an increase of 37% over the previous year. However, due to an increase in the share of revenue from proprietary products, increased product discounts, and increased equity incentive costs, the gross margin of FY24H1's self-operated products and live streaming e-commerce decreased by 9.5 pct to 33% year over year; sales rate increased by 9.1 pct to 20% year on year, and net interest rate due to the year-on-year decline in net income to mother and adjusted net interest rate. The company has always been committed to strengthening the supply chain management system, expanding product categories, and increasing the number of products and SKUs, especially self-operated products. As of November 30, 23, the number of self-operated products had exceeded 264. In the future, with the systematization of the supply chain and the strengthening of capacity, there is still room for improvement in the gross margin of its own products.
The contribution of the Douyin account matrix is growing, and I am optimistic about the subsequent volume of “Walking with Hui”. The number of followers selected by FY24H1 Dongfang was 45.8 million, an increase of 30% over the previous year. The number of orders already paid by Douyin was 59.6 million, a decrease of 15% over the previous year, partly affected by FY23H1's high base. Structurally, according to data from Feikua, the GMV of the FY24H1 Oriental Select Douyin Beautiful Life/Add Liquor account increased 1/2 times year over year, and the total GMV value of books and proprietary product accounts increased about 3.7 times year over year, and the Douyin account matrix is gradually unleashing value. The new account “Walk with Hui” was launched on January 9. While GMV broke 100 million on that day, there was no significant fluctuation between the main account and GMV of the self-operated category account.
We believe that the “Walk with Hui” account is expected to give more full play to the IP value of leading anchors and contribute more incremental revenue to the company.
The multi-channel construction continues to advance, and we look forward to the development of our own app and Taobao channel in 24 years. According to the company's January 24 earnings conference, the current number of app registrants is 3.6 million, and the number of new registered users is 5-8,000 daily; there are nearly 200,000 members, spending an average of 800 yuan per month, and the return rate is a few percentage points lower than that of major e-commerce platforms. As a private domain, self-owned apps generally show better user stickiness and willingness to pay than other channels, which is expected to help the company dig deeper into core user value. In terms of Taobao channels, the company's first broadcast of GMV on Taobao in August exceeded 100 million yuan, and it is expected to accelerate development after more mature operations.
Profit forecast and investment rating: Considering that the company's FY24H1 performance fell short of expectations and the uncertain external environment in 24 years, we lowered the company's FY24-26 non-IFRS net profit from RMB 13.5/15.2/1.65 billion to RMB 96/1.07 billion, corresponding to FY24-26 PE multiples of 22/19/18 times, respectively. We are optimistic about the long-term growth potential of the company's live e-commerce business and maintain a “buy” rating.
Risk warning: competition intensifies, consumption falls short of expectations, multi-channel operation results fall short of expectations