Q2 Revenue remained flat, increased competition put pressure on profitability, and maintained an increase in holdings rating

Jiajiayue released its semi-annual report. 24H1 achieved revenue of 9.36 billion yuan (yoy +3.0%) and net profit of 0.17 billion yuan (yoy -8.8%) to mother. Among them, Q2 achieved revenue of 4.17 billion yuan (yoy -0.2%) and net profit to mother of 22.47 million yuan (yoy -53.8%). The main reason why net profit performance was weaker than revenue was due to a 0.5 pct year-on-year decline in the company's gross margin and 0.3 pct year-on-year increase in sales expense ratio against the backdrop of increased competition and weak CPI support. Looking ahead to H2, with the moderate restoration of CPI and the gradual maturation of the company's new business format, we expect the company's profitability to improve month-on-month. We maintain the 24-26 net profit forecast of 0.24, 0.29, and 0.42 billion yuan. Referring to the comparable company Wind, the 24-year average of 15xPE, considering that the company's new discount chain is in a stage of rapid growth, the company was given 22xPE in 24 years, with a target price of 8.36 yuan (previous value of 11.4 yuan), maintaining the “additional” rating.

24H1 added a net 6/42 direct-operated/franchised stores. Snack stores showed strong growth. The company continued to transform and optimize direct-run stores and close inefficient stores. By business type, the company closed 5 comprehensive supermarkets in 24H1, added a net 8 new community fresh supermarkets, closed 3 rural supermarkets, and added a net of 6 other business formats. Growth in various business formats gradually stabilized. The revenue of 24H1 supermarkets, community fresh supermarkets, and rural supermarkets increased by 7.7%, 4.7%, and 0.9%, respectively. The franchise business showed strong growth, with a net increase of 42 to 100 affiliate stores in 24H1. The franchise business format is mainly Yueji snack stores, which cater to the high-frequency retail consumption of young consumers, and is expected to shape the company's second growth curve.

Competition intensified, new business formats grew, Q2 profitability was under pressure Q2, and offline retail price competition intensified, compounding the rapid development of the company's discount business. As a result, the company recorded negative growth in Q2 revenue, and gross margin was under pressure, falling 0.5 pct year-on-year. However, the company's expenses are relatively rigid. Sales/management expenses are basically the same year over year, and the sales/management expenses ratio is +0.3 pct/-0.01pct year over year. Looking ahead to H2, with the gradual recovery of CPI, the company's same-store growth rate is expected to recover, and profitability is also expected to improve.

The company has gradually come out of the bottom of the adjustment, and the new business format has entered a stage of growth. Although the profitability of the company's own stores has been slightly adjusted, the reform has been very effective. The number of visitors arriving at 24H1 supermarkets compared to stores increased 13.7% year-on-year; the opening of new stores also contributed to revenue growth. Among them, the new business formats Yueji Snack Store and Haohuixing Discount Store are all in the rapid exhibition stage. Against the backdrop of increased offline retail competition, and against the backdrop of continued clearance of weak stores, the company H1 operates 20 or 3 Xinkai Yueji Snacks and Haohuixing discount stores, demonstrating confidence in the development of the new business format. Wait for the rapid growth of the new business format to further improve the company's profitability.

Risk warning: offline retail competition intensifies, CPI recovery falls short of expectations, and new business formats fall short of expectations.