The company released its 2024 semi-annual report:

(1) Looking at the first half of 2024, the company achieved operating income of 6.766 billion yuan/ +31.10%, achieved net profit attributable to mother 1.448 billion yuan/ -27.54%, and achieved net profit of 1.419 billion yuan/ -22.86% after deducting non-return to mother. The rapid increase in revenue in the first half of 2024 was mainly due to increases in market operations, product sales, and trade services over the same period. The increases were 25.99%, 37.24%, and 30.63%, respectively. The profit side was mainly affected by changes in investment income.

(2) Looking at the second quarter of 2024, the company achieved operating income of 4.085 billion yuan/ +34.36%, achieved net profit attributable to mother of 0.735 billion yuan/ -5.31%, and achieved net profit of 0.728 billion yuan/ -4.14% after deducting non-return to mother.

The cost side continued the trend of optimization, and gross profit margin and net profit margin both increased.

The gross profit margin for the first half of 2024 was 33.08% /+2.49pcts, and the 2024Q2 gross profit margin was 29.16% /-1.12pcts.

On the cost side, the sales/management/ R&D expense ratios for the first half of 2024 were 1.36%/3.22%/0.17%, respectively, -0.14pct/-1.97pcts/-0.03pct; 2024Q2 sales/management/R&D expenses were 1.38%/2.85%/0.15%, respectively, -0.39pct/-2.38pcts/-0.00pct. The cost side showed a clear optimization trend in the first half of 2024.

In terms of net interest rates, the first half of 2024 achieved a net interest rate of 21.40% /-17.32pcts, and 2024Q2 achieved a net interest rate of 17.99% /-7.54pcts.

Yiwu's import and export growth is strong, and the market operation is full of vitality:

Judging from export data, Yiwu's total import and export volume maintained a high growth rate under the high base in 2023. In the first half of 2024, Yiwu's total import and export value reached 324.77 billion yuan, up 20.7% year on year; it was obligated to export 232.87 billion yuan through market procurement trade, up 28.7% year on year, accounting for 80.8% of total exports; the average daily passenger traffic in the voluntary market was 0.2188 million; and the average number of foreign investors exceeded 3,600, up 80% year on year.

Under the upward environment, the company seizes opportunities for fine management: 1) implementing digitalization in market operations, operating revenue 2.269 billion yuan/ +25.99%, iterating the index platform website during the reporting period, and proposing a 3-year action plan for the obligation index; 2) building an online platform, exploring AI business integration, adding 45 new third-party digital service products during the reporting period. The Chinagoods platform's 100-person R&D team launched 5 self-developed AI products. The net profit of the big data company was 72.7937 millions/+ 56.89%, Chinagoods GMV45 billion yuan/ +40.6%; 3) Building a self-operated trade ecosystem, with the 2024H1 self-operated trade volume reaching 3.895 billion yuan/ +37.27%; 4) Optimizing the digital payment platform, Express Connect and the Bank of China jointly promoted the implementation of the digital currency bridge project. The cross-border application of digital yuan was launched on May 30, and the cross-border RMB payment business transaction volume exceeded 12 billion yuan during the reporting period.

Investment advice:

Buy-A investment rating. We expect the company's 2024-2026 net profit of 2.877/3.203/3.436 billion yuan, +7.5%/+11.3%/+7.2% year-on-year, maintaining a buy-A rating, and a 6-month target price of 10.49 yuan, corresponding to 20xPE in 2024.

Risk warning: market operation risk, risk of changes in international trade policy, risk of overseas economic recession, risk of business development falling short of expectations, etc.