Affected by the consumer environment, the company's performance continues to be under pressure. In the first half of the year, the company achieved revenue of 15.173 billion/yoy -7.17%; net profit to mother 0.274 billion/yoy -17.58%; net profit deducted from non-mother 0.201 billion/yoy -29.22%. The Q2 Company achieved operating income of 6.344 billion/yoy -7.32%; net profit to mother 0.082 billion/yoy -29.50%. Among them, the revenue from disposal of non-current assets in the first half of the year was 85.79 million, an increase of 244.41% over the previous year, mainly due to the increase in the company's income from disposal of right-to-use assets.
By business type, outlets are relatively strong, and supermarket business losses have narrowed somewhat. Department stores and shopping malls were affected by weak overall offline consumption, and their performance continued to be under pressure. Revenue in the first half of the year fell 8.43%/5.14% year on year, respectively. Outlet performance was relatively strong, and revenue in the first half of the year remained flat year on year. Lianhua Supermarket achieved revenue of 11.869 billion/yoy -8.07% in the first half of the year, a net profit loss of 25.43 million, and a loss of 67.32 million in the same period last year, which narrowed somewhat. The professional chain achieved revenue of 0.393 billion/yoy -8.25% in the first half of the year.
Gross margin declined due to various business formats, and the expense ratio remained stable. In 2024Q2, the company's gross margin/net margin was -1.84/+0.43ct, respectively. The decline in gross margin in all business categories led to a significant decline in the company's overall gross margin. The increase in net interest rates was mainly due to the narrowing of investment losses of its joint ventures and an increase in income from non-current asset disposal. The 2024Q2 company's sales/management/financial expense ratios were -0.96/+0.07/+0.23pct, respectively. The company's 2024H1 inventory turnover days decreased by 3 days year-on-year; the number of accounts receivable turnover days increased by 2 days year-on-year, and overall control was good. Net operating cash flow for Q2 was 0.342 billion/yoy -133.47%, mainly due to a decline in revenue.
On August 17, the company announced that the Shanghai Youyicheng Shopping Mall project as the underlying asset was officially listed as a public REIT project. The total net amount raised by the fund was $2.332 billion. Compared with 0.441 billion yuan of this asset, the value-added rate was as high as 429.05%. The successful launch of this public REITs product will, on the one hand, successfully create a complete closed loop of “investment, finance, construction, management and withdrawal” of commercial real estate, helping the company to truly transform from a traditional asset-heavy operating model to an asset-light development model; on the other hand, it will help the company build an innovative financing platform in the capital market to achieve two-wheel drive for listed companies+public REITs platforms.
Risk warning: Performance recovery falls short of expectations, increased risk of industry competition, transformation and upgrading falls short of expectations.
Investment advice: In the first half of the year, the company's performance was under pressure due to the weakness of the overall consumer industry, but the performance of the company's core business, Olay, was still relatively steady, and losses in the supermarket business narrowed further. The retail business is expected to continue to develop steadily in the future. At the same time, the company is actively promoting asset securitization operations, and public REITs have been successfully listed, which can not only directly increase current profits, but it is also expected that additional capital will be used to further activate the company's operating potential. Considering that offline consumption continues to be pressured, and the listing of public REITs boosts this year's profit level, we raised 2024 and lowered our 2025-2026 net profit to 15.79/7.13/8.47 (original value was 7.24/8.33/9.13) billion, corresponding PE was 8/18/15x, maintaining a “superior to the market” rating.