occurrences

The company released its 2024 semi-annual report. 2024H1 achieved revenue of 6.04 billion yuan, a year-on-year decrease of 5.4%. Net profit to mother was 0.29 billion yuan, a year-on-year decrease of 43.4%, and net profit after deducting non-return to mother was 0.32 billion yuan, a year-on-year decrease of 30.1%. In the second quarter of a single quarter, 2024Q2 achieved revenue of 2.73 billion yuan, a year-on-year decrease of 9.5%. Net profit to mother was 0.09 billion yuan, a year-on-year decrease of 68.6%, and net profit after deducting non-return to mother was 0.13 billion yuan, a year-on-year decrease of 45.8%.

Operating pressure is rising quarter by quarter, and commodity consumption is generally sluggish

The 2024H1 offline consumer industry faced a severe market environment. The company's revenue fell 5.4% year on year. Excluding the impact of new stores, the same store fell even 7.3% year on year, mainly due to low customer unit prices. On a quarterly basis, due to insufficient consumer confidence, the company's Q2 revenue fell 9.5% year-on-year, and declined month-on-month. By business type, department store/shopping center/olai/specialty store/duty-free revenue was -13.7%/+0.0%/+0.2%/-3.1%/+121.2% year over year. Affected by sluggish product consumption, changes in consumption habits, and store transformation adjustments, department store revenue declined significantly year on year. The duty-free business was still in its infancy, and revenue increased dramatically. At the same time, the company terminated its joint supermarket business and withdrew.

The gross margin of all business categories declined, cultivating new businesses and new stores dragged down the performance of 2024H1. The gross margin of the company was 40.9%, down 1.0 pct year on year. The gross margin of all business categories was under pressure. The gross margin of department stores/shopping centers/Olei/specialty stores/duty-free duty-free gross margins were -0.8 pct/-3.5pct/-2.2pct/-2.0pct/-4.9pct, respectively. Among them, the duty-free business was affected by changes in revenue recognition methods. Opening stores during the same period brought pressure on the cost side. The company's sales expense ratio, management fee rate, and financial expense ratio were +0.4 pct/+1.3 pct/-0.1 pct, respectively. The obvious increase in management expenses ratio was mainly due to the combined effects of the wrong payment of year-end bonuses and the additional costs of opening new stores and stores in preparation for opening. There is still significant pressure on the company's profits due to the decline in revenue, the cultivation of new businesses and new stores, and the high upfront costs of new stores with a long rental period due to the influence of factors such as the higher upfront costs of new stores with a long rental period. 2024H1's net profit to mother was 0.29 billion yuan, a year-on-year decrease of 43.4%. Among them, Q1/Q2 net profit to mother was -10.9%/-68.6% year-on-year, respectively.

Optimistic about mid-term growth and maintaining the “gain” rating

Considering that consumer confidence is still insufficient, we expect the company's 2024-2026 revenue to be 11.51/12.6/13.25 billion yuan, with year-on-year growth rates of -5.8%/+9.5%/+5.2%, respectively, and net profit to mother of 0.56/0.8/0.98 billion yuan, respectively. The year-on-year growth rates are -21.1%/+42.6%/+22.2%, and EPS 0.5/0.7/0.9 yuan/share, respectively. Given that the company is firmly promoting the development of multiple business formats and the transformation of traditional business formats, and the continuous development of the duty-free business, we are optimistic about the company's mid-term growth and maintain the “gain” rating.

Risk warning: Economic growth is slowing; retail recovery falls short of expectations; tax exemption progress falls short of expected risk.