By-health(SZ:300146)2024-08-13 14:37Investment Rating - The investment rating for By-health is maintained as BUY with a target price of RMB15.37, indicating a potential upside of 31% from the closing price of RMB11.71 as of August 9, 2024 [7][8]. Core Insights - By-health's revenue and net profit have declined significantly in the first half of 2024, with revenue at RMB4,610 million (-17.6% year-on-year) and attributable net profit at RMB890 million (-42.3% year-on-year) [3][4]. - The decline is attributed to a high base from the previous year and challenges in the company's omni-channel strategy, which includes a diverse product lineup facing competition across various e-commerce platforms [3][4]. - The company plans to focus on its main brand and Life-Space, consolidating offline sales channels and enhancing product differentiation to expand into lower-tier markets [3][4]. Financial Performance Summary - For 1H24, By-health's gross profit margin (GPM) fell to 68.6%, down 1.8 percentage points year-on-year, with a notable decline in the second quarter to 66.8% [4]. - The sales expense ratio increased to 39.5% in 1H24, primarily due to higher brand promotion investments and increased platform expenses [4]. - The company has revised its earnings forecasts downward, estimating EPS for 2024, 2025, and 2026 at RMB0.70, RMB0.83, and RMB0.97 respectively [5][6]. Revenue and Profit Forecasts - Revenue projections for By-health are as follows: RMB8,447 million for 2024, RMB9,268 million for 2025, and RMB10,032 million for 2026, reflecting a decline in 2024 followed by growth in subsequent years [6]. - Net profit estimates are projected at RMB1,188 million for 2024, RMB1,419 million for 2025, and RMB1,648 million for 2026, indicating a recovery trend after a significant drop in 2024 [6]. Market Position and Strategy - By-health continues to strengthen its brand presence despite facing short-term revenue adjustments due to changing consumer sentiment and increased competition [4]. - The company is focused on improving operational quality and refining its strategy to adapt to the evolving market landscape [4].