The company's 1H2024 revenue decreased 25.35% year on year, achieving net profit to mother - 1.253 billion yuan. On September 2, the company announced the 2024 semi-annual report: 1H2024 achieved operating income of 4.225 billion yuan, a year-on-year decrease of 25.35%, and realized net profit to mother of -1.253 billion yuan (0.12 billion yuan in the same period last year, from profit to loss), converted into fully diluted EPS of -0.29 yuan, to achieve net profit deducted from mother -0.585 billion yuan, compared to 0.079 billion yuan in the same period last year.

Looking at the single-quarter split, 2Q2024 achieved operating income of 2.113 billion yuan, a year-on-year decrease of 30.56%, and realized net profit to mother of -0.882 billion yuan (-0.047 billion yuan in the same period last year), which translates into fully diluted EPS of -0.20 yuan, achieving net profit without deduction of -0.465 billion yuan.

The company's 1H2024 comprehensive gross margin increased by 1.24 percentage points, and the cost ratio increased by 7.47 percentage points during the period 1H2024. The consolidated gross margin of the 1H2024 company was 60.67%, up 1.24 percentage points from the previous year. Looking at the single-quarter split, the consolidated gross margin of 2Q2024 was 60.83%, up 1.48 percentage points from the previous year.

The 1H2024 company's expense ratio for the period was 52.67%, up 7.47 percentage points year on year. Among them, sales/management/finance/R&D expenses were 10.96%/11.48%/30.05%/0.17%, respectively, with a year-on-year change of +0.25/ -0.38/+7.59/+0.01 percentage points, respectively. The 2Q2024 company's expense ratio for the period was 53.67%, up 5.13 percentage points year on year. Among them, sales/management/finance/R&D expenses were 12.37%/11.56%/29.57%/0.17%, respectively, with a year-on-year change of +0.90/ -0.92/ +5.117/+0.03 percentage points, respectively.

Announced a number of development strategies, hoping that the company will turn losses into profits as soon as possible

In March 2024, the company announced the “3+ Star Ecology” strategy. In the next two years, the company will set up 100 high-end household appliances stores across the country, which will gather categories such as small kitchen appliances, cleaning appliances, personal care products, coffee and leisure, children's entertainment, etc., complementing the original large household appliances. In the first half of 2024, the company officially launched the construction of the second batch of 84 centers. It is expected that M+ high-end home decoration design centers will cover 100 malls nationwide by 2025. At the same time, the company also issued the “533” preferential long-term rental and no installation period policy.

Lower profit forecasts and maintain the “increase in holdings” rating

The company's performance fell short of our previous expectations, mainly due to the company's credit/asset impairment losses and losses from changes in the fair value of investment real estate, which had a certain adverse impact on the company's profits. Considering that there is still some uncertainty about the future development of the real estate-related industry chain, we lowered the company's 2024/2025/2026 EPS forecast to -0.02/0.06/0.07 yuan (the original forecast value was 0.08/0.09/0.10 yuan). The company issued a number of strategic plans to facilitate the company's long-term development and maintain the company's A share and H share “gain” ratings.

Risk warning: Market expansion and rent increases fall short of expectations, digital transformation results fall short of expectations, and changes in fair value profit and loss fluctuate more than expected.