Against the macro background of strong support for the development of private and real economy by the country, Huitongda Net (09878.HK), as one of the top 120 companies in the list of top 500 private economies, and as a platform enterprise empowering and assisting the growth of small and micro private economies, is ushering in unprecedented development opportunities.

Dual-wheel drive: The macroeconomic policies coexisting and prospering with the private and real economies.

Since the beginning of this year, the country has issued a series of policies multiple times, clearly demonstrating steadfast support for the development of private economy, optimizing the development environment for the private economy, protecting the property rights and entrepreneur rights of private enterprises in accordance with the law, and fully promoting the vigorous development of private economy and private enterprises. These policies provide a broad development space for leading companies in private economy like Huitongda Net, connecting its business model closely with the national strategy, and benefiting fully from the dividends brought by the policies.

In early September, the 2024 China Top 500 Enterprises Summit was successfully held in Tianjin, with Huitongda Net ranking 296th in the 'Top 500 Chinese Enterprises,' up 5 places from last year; and at the 100th position in the 'Top 500 Chinese Service Enterprises,' up 2 places. As the leading enterprise of industrial internet in the sinking retail market, Huitongda Net focuses on 6 major categories: consumer electronics products, household appliances, agricultural production materials, transportation, home building materials, and alcoholic beverages. Its business has covered 21 provinces, 0.025 million towns, providing quality services to over 0.246 million stores.

The company focuses on two core areas: supply chain capacity building and strengthening member service capabilities, establishing deep cooperation with numerous top brands, deepening the implementation of various strategies. Through the integrated online and offline approach, it drives comprehensive upgrades of digital and AI services, providing strong empowerment support for member store customers. With outstanding supply chain integration capabilities and cutting-edge digital technology, Huitongda Net creates a comprehensive service system for town retail stores in vast sinking markets, offering one-stop commodity procurement, efficient operational management, and precise marketing support.

According to the latest statistics from SDIC Securities' research report, nearly 70% of China's population resides in third- and fourth-tier cities and below, exceeding 0.8 billion people. In addition, the disposable income growth rate in sinking markets is higher than in leading markets, providing a huge consumer potential in sinking markets. In terms of consumption trends, as of 2023, the share of social zero consumption in sinking markets exceeded 60%, and the share further shifted to sinking markets after the epidemic, highlighting its increasing importance.

As a model of the private economy, Huitongda actively responds to national policies, fully utilizes its own advantages, continuously optimizes service quality and improves service efficiency through technological innovation and iterative models, providing more accurate and efficient empowerment solutions for small and micro private economic entities. Currently, Huitongda Network has built a comprehensive and multi-dimensional support network for small and micro private economic entities with its original five empowerment systems including '+supply chain,' '+technology,' and '+marketing.' Taking '+supply chain' as an example, Huitongda not only helps upstream manufacturers reduce costs and improve efficiency by building an innovative supply chain ecosystem, but also ensures that township retail stores can directly obtain first-hand high-quality goods, achieving quality and affordable commodity procurement. This measure significantly enhances the market competitiveness of small and micro private economic entities, promoting the harmonious coexistence and coordinated development of the entire supply chain.

Taking the example of Huang, the owner of a mobile communication shop in Hongyao Town, Lianshui County, Huai'an City, Jiangsu Province, since joining the Huitongda system, the store's sales have significantly increased. Huang emotionally expressed, 'Benefiting from Huitongda's professional operational support and the participation in the Apple township authorized store project, the store's visibility has greatly increased and successfully expanded to online platforms, realizing a new O2O instant retail model of online ordering and offline delivery.' This vivid case fully demonstrates the outstanding achievements of Huitongda Network in empowering small and micro private economic entities.

This business model not only effectively reduces the purchasing costs of township retail stores, improves operational efficiency, but also expands sales channels through digital means, increasing sources of income. In the macro environment where the country vigorously supports the private economy, the development model of Huitongda Network has gained broader recognition and support, laying a solid foundation for its continuous expansion and deepening of services.

As the cornerstone of the national economy, the importance of the real economy is self-evident. Huitongda Network has achieved rapid development by deepening the real economy of townships and towns. The country has repeatedly emphasized the need to vigorously develop the real economy, promote the transformation and upgrading of traditional industries, which has opened up broad market space for Huitongda Network.

Relying on its strong supply chain integration capabilities, Huitongda Network introduces high-quality products into the sinking market, meeting the increasingly diverse needs of consumers in townships and towns. Meanwhile, significantly improving the operational efficiency and customer experience of township retail stores through digital means effectively promotes the transformation and upgrading of the real economy in townships and towns. With the policy orientation of revitalizing the real economy in the country, the development model of Huitongda Network is more in line with the pulse of the times, expected to receive more policy support and market opportunities, continuously leading a new chapter in the integrated development of the private economy and the real economy.

Bullish on commercial circulation policies: Multiple opportunities for consumer electronics and the new energy fund industry.

2024 is the 'Consumer Promotion Year,' with the country vigorously promoting the replacement of old for new in consumer goods such as household appliances and automobiles. For example, in the first half of the year, the Ministry of Commerce and 7 other departments issued the 'Implementation Rules for Subsidies for Scrapping and Replacing Old Cars with New Cars,' clearly stating that the subsidies for scrapping and purchasing new energy vehicles / gasoline vehicles meeting the conditions are 10,000 yuan / 7,000 yuan respectively, injecting new impetus into the automotive consumer market.

With the deep implementation of national policies to boost consumption, replace old for new in new energy vehicles, and promote household appliances in rural areas, Huitongda Network has encountered unprecedented development opportunities in the household appliance and new energy vehicle industries.

On the one hand, Huitongda Net, as an important participant in the household appliance industry, actively responds to national policies by integrating upstream supply chain resources to provide high-quality and affordable household products for rural retail stores. For example, Huitongda has teamed up with Akai to create "Small Town Select" kitchen and small appliances.

The product focuses on "quality-price ratio", with the first batch of over 10 products launched, including rice cookers, electric pressure cookers, etc., fully tailored to the needs of the lower-tier market consumers.

At the same time, Huitongda Net also leverages its digital technology advantages to provide precise marketing strategies and customer service for rural retail stores, helping rural consumers better understand and purchase household products. Driven by national household appliance consumption policies, Huitongda Net's household appliance business has achieved rapid growth, further consolidating its leading position in the household appliance industry.

With the rapid development of the new energy automobile market and the strong support of the country for the new energy industry, Huitongda Net is also actively deploying in the new energy industry, reaching in-depth cooperation with leading new energy companies such as Nezha Auto. Leveraging its channel advantages in the lower-tier market, Huitongda Net provides sales and after-sales services for new energy vehicles to rural consumers, promoting the popularization of new energy vehicles in rural markets.

Furthermore, Huitongda Net also utilizes its digital technology advantages to provide precise market analysis and marketing strategies for new energy vehicle manufacturers, helping manufacturers better understand rural consumer demands, optimize product design and production. With the promotion of national new energy policies, Huitongda Net's new energy business is also expected to achieve rapid growth and become a new profit growth point for the company.

CSRC's "Six Mergers and Acquisitions Policies" are expected to accelerate the pace of returning to A-share strategic advancement.

In September 2024, the CSRC officially released the highly anticipated "Six Mergers and Acquisitions Policies". The release of this policy provides more convenience and support for companies in the merger and acquisition market. Guolonghui believes that this not only provides favorable conditions for Huitongda to more deeply connect with upstream production enterprises but also provides external impetus for Huitongda Net, a Hong Kong-listed company, to return to the A-share market in the future.

"Six Mergers and Acquisitions Policies" mainly include aspects such as improving M&A restructuring review efficiency, simplifying approval processes, and strengthening M&A restructuring supervision. Improving review efficiency and simplifying approval processes will effectively reduce the time and economic costs of corporate M&A restructuring; strengthening M&A restructuring supervision will help regulate market order and prevent market risks. The implementation of these policies will provide more convenient, efficient services, and support for corporate M&A restructuring.

For Huitongda Net, the implementation of the "six measures for mergers and acquisitions" policy will bring the following several bullish impacts:

First, accelerate the pace of returning to the A-share market. With the further opening of the merger and acquisition market and the continuous optimization of policies, Huitongda Net is expected to achieve rapid business expansion and market share increase through mergers and reorganizations, providing strong support for its accelerated return to the A-share market.

Second, broaden the financing channels. After entering the A-share market through mergers and reorganizations, Huitongda Net will have a broader financing channel, which will help the enterprise raise more funds for business expansion, technological innovation, and other aspects, further enhancing the company's overall strength and competitiveness.

Third, expedite the implementation of the upgrade strategy for integrated production and sales, self-owned brands, etc. With the support of the merger and acquisition policies, Huitongda Net is expected to more widely participate in product research and development, production end through acquisitions, shareholdings, and other means, promoting the core strategy of integrated production and sales, as well as the establishment of self-owned brands.

From the market perspective, the release of the "six measures for mergers and acquisitions" policy further strengthens investors' confidence in the future development of Huitongda Net. Many analysts believe that with the continuous implementation of policies and the gradual maturity of the market, Huitongda Net is expected to have a place in the future merger and acquisition market. At the same time, if it smoothly returns to the A-share market, it will also bring more development opportunities and growth space for Huitongda Net.