Incident: Chongqing Department Store released 24H1 earnings report.

① 2024H1: Revenue of 8.98 billion yuan, -11.6% year on year; net profit due to mother 0.71 billion yuan, -21.1% year on year; net profit after deducting non-recurring profit and loss and immediate consumption investment income of 0.374 billion yuan, -4.5% year over year.

② 2024Q2: Revenue 4.13 billion yuan, -18.5% YoY; net profit to mother 0.28 billion yuan, -28.9% YoY.

By business type: The number of 24H1 department store/supermarket/electrical/auto trade business was 50/149/41/34, respectively, and the total number declined from month to month. Among them, department store revenue was 1.33 billion yuan, -6.9% year over year, supermarket revenue was 3.68 billion yuan, -3.7% year over year, electric appliance revenue was 1.66 billion yuan, +0.88% year over year, and auto trade revenue was 2.23 billion yuan, -28.7% year over year.

Gross margin and expenses: 24H1 gross profit margin of 26.7%, year-on-year +0.7pcts, sales/management/R&D/finance expense ratios were 14.0%/4.7%/0.1%/0.3%, respectively, with a year-on-year change of +0.75pcts/-0.07pcts/-0.05pcts/-0.43pcts.

Looking ahead to 24 years: Store restructuring is expected to increase performance.

The company decided on an adjustment model, built a new “supermarket” brand, tried a new “fresh+discount” model, and revised 2 “supermarket bazaars” in the first half of the year. Among them, the California store achieved profit in May, untaxed sales were +36.5% year-on-year, and the number of transactions was +83.4% year-on-year, and gross profit increased by more than 38%; by the end of June, the number of transactions was +110% year-on-year, and the net gross profit was +96.8%.

Profit forecasting and valuation: The company is a market-leading and competitive retail enterprise with outlets and operating scale in Chongqing and Sichuan regions. The company is actively embracing change and returning to the essence of business. The company has begun a discount retail-related business, and at the same time, the store reform is experimenting with a new “fresh+discount” model, which is expected to increase performance in 24; in addition, the company has also invested in immediate consumer finance, which also contributed quite a bit to profit. The overall estimate is that the company's net profit for 2024-2025 is 1.46 billion/1.62 billion yuan, corresponding to 5.3x/4.8xPE, maintaining a “highly recommended” rating.

Risk warning: business expansion falls short of expectations, consumption recovery falls short of expectations, investment returns fall short of expectations