红旗连锁（002697）：经营提质增效，盈利能力稳步改善

Investment Rating - The report maintains an "Accumulate" rating for the company with a target price of RMB 6.55 [8][6]. Core Views - The company reported H1 2025 revenue of RMB 4.81 billion, a year-over-year decrease of 7.3%, while net profit attributable to shareholders was RMB 280 million, an increase of 5.3% year-over-year [1]. - Despite short-term revenue pressure due to store structure optimization, the company's profitability is steadily improving, and its medium to long-term development potential is noteworthy [1][6]. - The company is focusing on enhancing operational efficiency and resilience through channel restructuring and efficiency improvements [1][2]. Summary by Sections Revenue and Profitability - In Q2 2025, the company achieved revenue of RMB 2.33 billion, down 7.4% year-over-year, with net profit attributable to shareholders reaching RMB 120 million, up 20.3% year-over-year [1][2]. - The gross margin in Q2 improved by 2.4 percentage points to 30.5%, likely due to product mix optimization [3]. Market Strategy - The company is strengthening its presence in lower-tier markets by preparing distribution centers in southern Sichuan cities to offer high-cost performance products and services [2][5]. - The company is actively developing its own brand, "Hongqi Preferred," to enhance brand image through high-quality, low-cost products [4]. Technological Integration - The company is exploring AI applications across its supply chain, inventory management, logistics, and store operations to improve efficiency [4]. - The integration of online and offline sales channels is being emphasized, utilizing frequent live broadcasts on platforms like Douyin to drive online exposure and conversion [5]. Financial Forecast - Revenue forecasts for 2025-2027 have been adjusted downwards by 8.1% each year, with expected net profits of RMB 550 million, RMB 600 million, and RMB 610 million respectively [6]. - The report anticipates continued improvement in gross margin and operating expense ratios due to ongoing management optimization [6].