Incident: Huitongda Network released its 2023 annual report. The company during the reporting period. In 2023, the company achieved revenue of 82.43 billion yuan, yoy +0.4%; net profit to mother was 450 million yuan, yoy +41.7%, and a net profit margin of 0.5%.

Consumer electronics revenue increased and gross margin improved. Consumer electronics revenue in 2023 was 44.89 billion yuan, yoy +19%. Mainly due to the expansion of sales channels, strategic cooperation with leading brands continues to deepen. In addition, the company actively adjusted the product structure of the trading business and reduced the proportion of low-profit margin businesses and products. Gross margin for the full year of 2023 reached 3.3%, up 0.1 pct year over year. The sales expense ratio was 1.7%, which is roughly the same as in 2022.

Supply chain capabilities continue to improve, and cooperation with leading brands is deepening. Deepen ongoing cooperation with well-known brands such as Apple, Midea, Gree, Joyang, BYD, GAC Aian, Nana, Wuliangye, Yanghe, Jinshiyuan, and Unilever. Accelerate private brand building and integrated production and marketing: focus on the most cost-effective products such as Zhonghuida air conditioning and Huizongli compound fertilizer to achieve breakthroughs in integrated production and marketing. Online and offline omnichannel layout:

Good cooperation has been established with mainstream platforms online to help small stores expand sales channels. Offline, it has expanded more than 237,000 member retail stores and more than 20,000 service providers and channel partners, such as Shandong Sanlian, etc., to form an online and offline omni-channel layout.

Store service capabilities continue to improve, with store SaaS+ subscription business YoY +5.3% and merchant solution business yoy -64.5%, mainly for the company to actively reduce some low-margin precision marketing and software customization services.

Investment advice: Huitongda's SaaS business is growing rapidly. In the future, the company will continue to increase investment in R&D, continuously launch new products and services, expand its customer base, enhance profitability, and strive to become a leading enterprise-level SaaS service provider in China. It is estimated that in 24/25/26, the company's revenue will reach 881.03/938.69/100.127 billion yuan, and net profit to mother will reach 5.69/7.31/918 billion yuan, respectively, and YOY +26.9%/28.6%/25.5%, respectively. We are optimistic about the company's business prospects in the sinking market and maintain a “buy” rating.

Risk warning: industry competition intensifies; terminal consumer demand falls short of expectations, etc.