News Alert: 1H22 preliminary results below expectations
- Yonghui released 1H22 profit alert with core profit of c.RMB80m vs. 1H21 core loss of c.RMB930m. In 2Q22 alone, the core loss was c.RMB548m (2Q21: core loss of RMB1,098m) mainly due to high operating cost ratio, below market and our expectations.
- Attributable loss contracted by 89%/44% y-o-y to c.RMB120m/RMB622m in 1H22/2Q22, respectively.
- Yonghui scored revenue growth during 1H22, with a same-store sales growth of 7.2% in 2Q22.
- Supported by the normalising operating environment and less intense competition, Yonghui’s GP margin grew by 2.2ppts y-o-y in 2Q22 to c.19%, still below the pre-pandemic level.
- Expenses on technology development amounted to RMB300m in 1H22.
- Operating expenses were down q-o-q in 2Q22 while operating cost ratio remained high amid higher technological investments.
- During 1H22, loss of online business contracted y-o-y to RMB120m.
- A pre-tax loss of RMB440m on the change in fair value of financial assets was recognised in 1H22.
- Despite the lingering pressure from community group buying players in the near-term, we believe Yonghui should see sequential improvement in profit margins in 2H22 amid the abating market competition.
- Meanwhile, the easing COVID-19 situation in China may also support Yonghui’s sales and margin recovery in 2H22.
- Along with the potentials of its omni-channel digital platform to support efficiency improvement, Yonghui’s net profit margin may recover gradually towards 2% or higher in two to three years, in our view.
- Our last rating was a HOLD with TP of RMB4.55.
