Incident: The company's 2024H1 revenue was 8.98 billion yuan, -11.56% year over year, net profit to mother of 0.712 billion yuan, -21.06% YoY, net profit of 0.704 billion yuan after deduction, -13.06% YoY.

Investment income and non-financial effects were significant. The profit of the main business 2024H1 was -4.52% year-on-year. 2024H1's investment income for Malaysia was 0.332 billion yuan, -20.66% year on year, and non-recurring profit and loss (mainly Dengkang's fair value change profit and loss) was 7.6044 million yuan, down 91.71% year on year. After deducting the main business profit after not deducting Malaysia, the main business profit was 0.374 billion yuan, or -4.52% year over year.

2024Q2 performance was affected by factors such as the general retail environment, and the general retail environment. 2024Q2's revenue was 4.13 billion yuan, -18.52% YoY, net profit to mother 0.277 billion yuan, -28.93% YoY, Masho investment income 0.166 billion yuan, YoY -30.63%, non-recurring profit and loss 0.018 billion yuan, -51.31% YoY, main business profit 0.093 billion yuan (YoY), and -17.76% YoY. The decline in 2024Q2 performance is mainly due to 1) Dengkang Dental's listing in the same period last year, with a high profit and loss base for fair value changes; 2) Ma Xiang's high base for the same period last year and 2023H2 increased its provision plan; 3) The retail environment was under pressure, which had an impact on the main business. Since June, the company has launched many promotions such as the Home Appliance Festival and Department Store Festival, which is expected to drive the main business to recover.

A new discount+fresh food business format has opened, and the main business continues to change. The company's supermarket business format began a discount transformation through deep adjustments to the procurement system. On May 28, the company's first fresh+discount model store opened, and on June 26, the second traditional supermarket switched to a fresh+discount model, and sales increased more than fivefold on the day of opening.

Investment advice: The company's location advantage is obvious, the leading position is stable, it insists on normalizing cash dividends, and the high dividend value is prominent. Short-term results are under pressure. The high investment return base factor was eliminated in the second half of the year, and performance is expected to improve month-on-month. We expect 2024-2026 net profit of 1.375/1.505/1.65 billion yuan, corresponding to PE6.3/5.8/5.3X, maintaining the “gain” rating.

Risk warning: the risk of macroeconomic fluctuations; the risk that market competition will increase the risk; the immediate growth rate of the consumer finance business will fall short of expectations.