Key points of investment:

The company released a quick report on 2024 semi-annual results. According to the company's announcement, 1) 24H1 achieved operating income of 8.98 billion yuan, -11.56% year on year; net profit to mother of 0.712 billion yuan, or -21.06% year on year; and deducted non-net profit of 0.704 billion yuan, or -13.06% year over year. 2) The company's 24Q2 revenue was 4.13 billion yuan, -18.52%; net profit to mother was 0.277 billion yuan, -28.93% year-on-year, and non-net profit deducted 0.258 billion yuan, or -26.51% year-on-year.

Net profit due to the immediate decline in consumer profit and non-current profit and loss caused a decline in net profit to mother. After excluding the impact, net profit fell 4.52% year on year. According to the company's announcement, the main reasons for the decline in net profit from immediate consumption are: 1) Net profit from immediate consumption of 23H1 increased by 130.71% year on year, contributing 0.418 billion yuan to investment income, accounting for 46.2% of net profit before adjustment. The impact of the historical high base figure led to a 20.66% year-on-year decrease in net profit for 24H1 Malaysia, which in turn affected the contribution to investment income. 2) 24H1 achieved non-operating profit and loss of 7.6044 million yuan. After adjusting for 23H1 non-recurring profit and loss, it was 91.6903 million yuan, a year-on-year decrease of 91.71%, mainly due to the listing transaction of Chongqing Dengkang Dental Care Products Co., Ltd., where fair value pricing affected non-profit and loss. 24H1 continued to reduce costs and increase efficiency, driving rent reduction and rent reduction. Labor costs and rent costs continued to fall. The company's net profit after deducting non-recurring profit and loss and immediate consumer investment income was 0.374 billion yuan, a decrease of 4.52% over the previous year.

A new type of “fresh+discount” store opened, and a series of mid-year promotions were launched to promote customer flow and sales growth. According to the company's official account, on May 28, New Century Supermarket opened its first fresh food discount supermarket. The sales volume on the same day exceeded 0.6 million yuan, and sales reached 2.188 million yuan in 6 days after opening. The second fresh food discount store opened in June, with sales of nearly 0.4 million yuan on the same day. On May 11, the company's first department store festival was fully launched. 1,700 brands participated simultaneously online and offline. In 10 days, 50 shopping malls in Zhongbai New Century achieved sales of 0.32 billion yuan. Customer traffic increased nearly 14% year over year, and online sales of Zhongbai Cloud Shopping increased nearly 70% year over year. From July 5 to 7, nearly 150 stores in Chongqing Department Store and New Century Supermarket launched the Mid-Year Festival event. Through various marketing models and resource linkages, annual low price promotions were promoted, and sales reached 0.16 billion yuan.

The new leadership team empowers the company to innovate and develop. On May 30, the company's new board of directors and supervisory board team took office. Zhang Wenzhong is the company's chairman, Hu Chun and Zhao Guoqing are the vice chairmen (Zhao Guoqing is the founder and general manager of Consumer Finance), Hu Hongwei, the former general manager of the Home Appliance Division, is the general manager, Wang Huan and Han Wei are the deputy general managers, Wang Jinlu is the company's director, and Chen Guo is the secretary of the board of directors. Most of the new leadership team members have extensive work and management experience within the company. We expect to empower the company's future business strategy and enhance team confidence.

Maintain a buy rating. The company's scale advantage in the Sichuan and Chongqing region continues to show. Department stores, supermarkets, electrical appliances, and automobile trade are innovating and collaborating in multiple business formats, accurately understanding consumer demand to build six core capabilities, while optimizing the internal governance structure, and optimistic about the long-term growth of the main business. We maintained the company's 24-26 net profit of 1.436/1.565/1.735 billion yuan, corresponding to PE of 6/5/5 times, respectively, and maintained the purchase rating.

Risk warning: Consumer finance growth falls short of expectations; industry competition intensifies; business development falls short of expectations.