Affected by organizational structure and strategic adjustments, Huitongda's performance in the first half of 2024 was under pressure. We adjusted our revenue and profit forecasts for the whole year. Revenue is expected to improve quarterly in the second half of the year. Revenue for the full year of 2024 fell 14% year on year, and gross margin is still on an upward trend. Net profit to mother is expected to remain flat year on year in the second half of the year, and profit for the whole year is down 23% year on year. Revenue and profit are expected to recover after the completion of business transformation in 2025, and are expected to increase 17%/53% year over year, reaching historic highs. Based on 20 times the 2025 price-earnings ratio, we adjusted the target price to HK$21 (previously HK$30). The company's business adjustments are conducive to long-term high-quality growth, but short-term uncertainty remains, and the rating remains neutral.

Results for the first half of 2024: Revenue of 32.9 billion yuan (RMB, same below), a year-on-year decrease of 24%, mainly due to short-term market demand pressure and the company's active strategy adjustment and channel business reduction. Among them, trading business fell 25% and service business increased 12%. The gross profit margin was 3.5%, an increase of 0.5 percentage points over the previous year, thanks to continuous optimization of the category structure, reduction of inefficient business, deepening cooperation with leading brands, building its own brand, and integrated production and marketing operations. The adjusted net profit to mother was 0.13 billion yuan, corresponding to a net interest rate of 0.4%.

Key performance points: 1) The revenue structure of the transaction business improved, the share of the channel side fell to < 50%, and the share of member retail stores increased by about 8 percentage points. The number of active member stores increased by nearly 20% year-on-year, faster than registered member stores. 2) With the exception of the home appliance industry, which was affected by short-term structural adjustments, the gross margin of other industries increased year-on-year. Among them, benefiting from the contraction of low gross margin business, the home building materials and alcohol and beverage industry increased significantly. In other industries, the cleaning and chemical industry reached cooperation with Unilever and actively expanded high-margin products such as home cleaning, personal care, and beauty. 3) The company will focus its strategy on deepening brand cooperation, integrated production and marketing operations, and expanding new categories such as washing chemicals and new energy.