Chongqing Department Store: The century-old retail leader is deeply involved in the southwest, continuing to push forward national reform and improving operational efficiency in multiple dimensions. The predecessor of Chongqing Department Store can be traced back to Baoyuantong, which was established in 1920. After 100 years of focusing on the layout of Chongqing and other southwest regions. The company operates in a variety of retail formats, mainly operating in four major business formats: supermarkets, auto trade, electrical appliances, and department stores, accounting for 32.6%/32.0%/15.4%/10.6% respectively in 2023. In 2015, the company initiated the establishment of an immediate consumer finance company, holding 31.06% of the shares, and continues to increase profit levels through investment income. As a pioneering pilot unit for state-owned enterprise reform, the company continued to push forward national reform. Mixed reform was launched again in 2018, and finally implemented in March 2020. Subsequent, the company promoted state-owned enterprise reform in multiple dimensions through measures such as appointing new management (October 2020), introducing equity incentives (July 2022), and absorbing the Chongqing Trading Company (end of 2022) to stimulate operating vitality. At the same time, following industry trends on the business side, promoting collaborative innovation in various business formats, comprehensive digital transformation and refined management on the technology side, empowering growth with technology, promoting internal resource integration on the management side, and stimulating internal vitality, thereby improving operational efficiency in multiple dimensions.

The gradual integration of online and offline retail formats has accelerated, the pace of business transformation has accelerated, multi-format collaborative innovation, and digital and refined management have stimulated internal vitality. The share of online retail is stabilizing. At the same time, there is a trend of integration between online and offline retail formats. In line with industry trends, enterprises are promoting digital-driven efficiency improvement. Looking at the specific business format: 1) Department store format: As a regional department store leader in Chongqing, it currently has 50 stores and occupies a regional advantage. It mainly focuses on stock store restructuring, integrates strategic resources, creates commercial landmark projects, and creates a “heavy cloud shopping” online platform in line with industry trends. 2) Supermarket business format: As one of the leaders in Chongqing, we accelerate supply chain transformation, continue to innovate in business formats, develop our own brands, and deeply empower digitalization with more Dmall to consolidate local advantages. 3) Electric appliance industry: Benefiting from the dividends of those left over from Gome and Suning, based on local and extensive cooperation with electrical appliance suppliers in Chongqing, the “Zhong100 Little Brother” electrical service platform was launched to meet the offline installation and delivery service needs of remote villages, get through the “last mile” of the countryside, and continue to promote the layout of the sinking channel. 4) Auto trade format:

Use our strength to adapt to industry segmentation trends, expand derivative businesses such as used cars and modifications, and expand new energy brand licensing. Overall, the company's main business is expected to grow steadily.

Investment: Ma Shao's net profit rose, and Dengkang Dental went public to jointly increase investment returns. 1) Immediate spending: The scale of the domestic consumer credit industry continues to expand. Currently, banks are the main suppliers in the market, and the share of licensed consumer finance companies is expected to expand under the impetus of stricter policies. Soon, Consumer Finance will stabilize its leading position among licensed consumer finance companies. The “finance+technology” gene is strong, and the net profit scale is expected to continue to rise. 2) Dengkang Dental: As an influential professional dental care company in China, the company was listed on the Shenzhen Stock Exchange on April 10, 2023. Chongqing Department Store held 1.74% of the shares. By the end of 2023, Chongqing Department Store achieved fair value change revenue of 64 million yuan.

Investment advice: The company is a “main+investment” two-wheel drive retail leader in the southwest region. Since 2018, the company has continued to promote national reform and improve operational efficiency in multiple dimensions. For the main retail business, the company promotes the regulation of existing stores, accelerates the integration of online and offline business formats through comprehensive digitalization, and actively explores business model innovation. In terms of investment business, the consumer credit industry is steadily expanding, and consumer finance soon has both “license” and “technology” advantages, and continues to contribute to investment income. The company's 2024-2026 EPS is estimated to be 3.21/3.50/3.80 yuan/share. Considering the company's historical valuation level, comparable company valuation level, and historical dividend situation, the target market value is 17.18 billion yuan (corresponding to 12x PE in 2024), which covers the “buy” rating for the first time.

Risk warning: macroeconomic recovery seriously falls short of expectations; risk of immediate consumer finance operations; risk of tightening policy supervision.