The new rental warehouse has been launched, and the infrastructure is sound to enable the development of cross-border e-commerce. In order to better promote the development of the company's cross-border business, the holding subsidiary EfulFill, Inc. plans to launch PELOTON INTERACTIVE, INC. The warehouse is leased in Linden, New Jersey, USA. The lease area is 0.25 million square feet (about 0.023 million square meters), the lease amount is 17.3135 million US dollars (tax included, about RMB 0.124 billion), the security deposit is 1.275 million US dollars (about RMB 9.111 million), and the lease period is 53 months.

Over the past 12 months, the company has leased 7 overseas warehouses (excluding this lease), with a total area of about 2.8 million square feet (about 0.26 million square meters), and the total rent amount is 0.169 billion US dollars (tax included, RMB 1.209 billion). The rental period for each overseas warehouse ranged from October 1, 2023 to April 30, 2032.

This overseas warehouse leasing project will further improve the company's overseas warehouse layout, effectively support the development of the company's cross-border e-commerce business, help enhance the company's market competitiveness, promote the company's continuous development, and conform to the company's long-term development strategy and the interests of all shareholders.

Guided by the logical model of cross-border e-commerce, we look forward to peak season performance in the second half of the year

The company's cross-border e-commerce business achieved revenue of 1.621 billion yuan in 23, a year-on-year increase of 60.50%. We expect significant scale growth in 24. We believe that the company has a high degree of acumen and execution in market control and platform operation. In addition to continuing Amazon's competitive strength, it has fully grasped the early growth dividends of new platforms such as TK/TEMU to accumulate first-mover advantages such as account/scale/cost, and continue to consolidate the dominant position in the home furnishing category of various platforms.

According to Sorftime data, the company's Amazon sales continued to increase year-on-year and month-on-month in July, and performed brilliantly during the big promotion period; we expect the traditional peak season to increase stocking in the second half of the year, and the decline in shipping costs is expected to bring profit flexibility.

Global layout of production capacity to avoid the impact of tariffs

Facing the impact of potential tariffs imposed by the US, the company is actively promoting the global production capacity layout. Currently, Vietnam's production capacity accounts for about 30% of total production capacity. In the future, the company will gradually release production capacity according to market and customer needs, and we expect that the impact of tariffs may be avoided.

Maintain profit forecasts and maintain “buy” ratings

The company's core competitiveness in cross-border e-commerce continues to be consolidated and strengthened, and the traditional OEM business is expected to continue to be resilient. We expect net profit to be 0.55 billion/0.67 billion/0.82 billion for 24-26, and the corresponding PE is 8X/7X/5X, respectively, maintaining a “buy” rating.

Risk warning: Overseas demand recovery falls short of expectations; new cross-border e-commerce platforms are resistant to promotion; risk of declining core customer share, etc.