The company issued an announcement on the evening of July 8, 2024, promising to return at least 15% of distributable profits to shareholders in cash dividends for the next 3 years (2024-2026), and to hold an online exchange meeting on July 9 to update the company's strategy and recent business developments.

Operating data update: 1) Member store expansion: By the end of June 2024, the company's registered member stores/active member stores reached 0.24 million/0.09 million, up 12%/19% year-on-year respectively, and the average purchase amount per store remained at RMB 0.35 million. From January to May, the share of revenue from member stores increased to 44%, compared to 35% for the same period of the year. The company continues to enhance the richness of member store enabling services and enhance member store loyalty.

2) Integrated production and marketing supply chain construction: The company actively improved its profit structure and increased the development of its own brands. In January-May, with the establishment of its own brand and deepening cooperation with major brands, the headquarters supply chain accounted for 51%, and the average gross margin of the company's seven key categories increased 21% compared to last year. Inventory turnover days were kept below 12 days, and operating cash flow remained positive.

Sub-sector: 1) Consumer electronics: Mobile phone sales in the first half of the year benefited from Apple's price cuts. The performance in the second quarter was better than in the first quarter, but profits will be affected by price cuts in the first half of the year, and the second half of the year is expected to recover due to the brand's sales policy support for dealers. 2) Home appliances: Policies for trade-in and home appliances to rural areas were still in the process of being introduced one after another in the first half of the year, and short-term growth is still under pressure. Facing industry adjustments, the company built its own brands, such as the air conditioning brand Altisa, which set up a 24-hour production line and placed an initial order of 0.016 million units. In addition, the company has also strengthened authorized cooperation with well-known brands to produce products more suited to the habits of users in the sinking market, and also promote the improvement of the company's profit structure. 3) New energy transportation: Currently, new energy businesses related to photovoltaics are being added around new energy vehicle sales, used car sales, and battery recycling. 4) Agricultural agricultural tools: The boom in the industry is weak, and the prices and sales volume of chemical fertilizers and pesticides, which contribute a lot to the company's revenue, have declined to a certain extent. The company has tactically reduced the scale of general-purpose chemical fertilizers, and cooperated with leading fertilizer companies to lay out fertilizer categories in line with the country's “one minus three” strategic policy. The pesticide sector transforms and lays out formulations, and plans to establish joint ventures with mature listed companies to lay out agricultural formulation production lines to achieve a strategic layout integrating production and marketing. 5) Daily cleaning: In 2024, the company will strengthen in-depth cooperation with cleaning brands and launch its own home cleaning products. The plan is to extend it to its own brands in categories such as daily care and beauty masks.

Going overseas: The company lays out overseas development based on product capabilities and resource accumulation in its own supply chain. At present, the company has basically clarified its direction and will focus on expanding the Southeast Asian and Central Asian markets. Huitongda has been deeply involved in China's sinking market for many years, creating products close to the needs of sinking users, and in line with local consumption habits. In 2024, the company built its own air conditioning brand Altisa and sold it to Central Asia. The company has established a deep cooperative relationship with Jitu. Using the latter's channel and network construction in Southeast Asia, as well as the layout of Huitongda's affiliate Five Star Holdings in Southeast Asia, it will also expand its supply opportunities in Southeast Asia.

Investment Implications: The company is currently in a stage of strategic transformation, as well as the impact of adjustments in the home appliance, household, agricultural materials and other industries. Short-term revenue growth is under pressure, focusing on profit growth. We expect profits in the first half of the year to be affected by Apple phone price cuts and profit pressure. Driven by an integrated production and marketing strategy, profits are expected to recover in the second half of the year, and the 30% profit growth target for the whole year remains unchanged.