Company Releases 2024 Interim Report

In 24Q2, the company's revenue was 0.59 billion, down 7.1%; net profit to mother was 0.11 billion, a decrease of 21.0%. 24H1's revenue was 1.13 billion, down 9.5%, mainly due to weak terminal demand and channel optimization; net profit to mother was 0.22 billion yuan, a decrease of 27.5%.

By channel, direct revenue was 0.45 billion, down 19.0%, accounting for 40.3%; distribution was 0.48 billion, down 1.0%, accounting for 42.7%; e-commerce was 0.19 billion, down 3.1%, accounting for 16.9%.

The 24H1 gross profit margin was 75.4%, a decrease of 0.4 pct; in terms of cost ratio, 24H1's sales expenses were 0.44 billion, the same decrease was 9.9%, and the sales rate was 39.0%, the same decrease was 0.2 pct, due to the reduction in sales staff wages and salary, rent and shopping mall expenses; the management rate was 8.8%, an increase of 2.1 pct; the R&D rate was 3.2%, an increase of 0.1 pct; the financial rate was -1.7%, the same increase of 2.0pct.

24H1's net profit margin was 19.7%, down 4.9pct.

Refined omni-channel operation, focusing on member groups

Offline channels, the company optimizes the training system and operation management process; online channels, the company collaborates with e-commerce platforms to carry out live streaming and short video content marketing. During the 618 shopping festival, the company's online omni-channel sales grew rapidly. The d'zzit brand 618 first entered the Tmall women's clothing industry TOP20. At the same time, the company continued to expand content channels, and 24H1 shopping channel revenue increased by more than 400% year-on-year.

Comprehensively launch a global membership marketing campaign, provide differentiated shopping experiences according to members' different demands, and channel online traffic to offline stores through online customer acquisition and offline repurchases. In addition, the company is also trying to expand the home shopping scene to provide members with a better shopping experience and service; it has launched a points mall and a planting community to enhance members' stickiness and loyalty.

Use core products to create high-quality content in key categories

In the first half of 2024, the company opened with “Four Seasons Knitwear” and “Cover Up Dress” as a special project. By continuously sorting out and creating in-depth high-quality content in key categories and discussing the quality and process innovations behind them, the company enhances the market's perception and awareness of design ingenuity and process innovation of core items, continuously enhances the brand image, leads the market, and stimulates consumer resonance.

Adjust the profit forecast to an “increase in holdings” rating

Based on the 24H1 financial report and weak terminal demand, we adjusted the profit forecast. We estimate that the return for 24-26 will be 0.45 billion, 0.5 billion, and 0.54 billion (the original value was 0.51/0.57/0.65 billion yuan), and PE will be 11X, 10X, and 9X, respectively; the investment rating will be changed from “buy” to “increase holdings.”

Risk warning: increasingly fierce market competition; risk of changing fashion trends; risk of dealer management and stable cooperation; business performance affected by seasonal fluctuations, etc.