ATRenew(US:RERE) HTSC·2026-01-06 09:11Investment Rating - The report initiates coverage on the company with a "Buy" rating and sets a target price of $7.64, based on an 18x adjusted PE for 2026 [1][7]. Core Insights - The company is a leader in China's second-hand circular economy, integrating the entire 3C second-hand recycling industry chain through four main business lines: Aihuiqiu, Pai Jitang, Paipai, and AHS Device, achieving a closed-loop system of C2B recycling, B2B circulation, and B2C retail [1][19]. - The company is expected to evolve from a fulfillment service provider to a brand owner, enhancing profit margins through retail and compliant refurbishment while expanding into multiple categories for growth [1][21]. Industry Overview - The second-hand electronics market is characterized by low penetration rates and high growth potential, with a projected transaction volume of approximately 702 billion yuan in 2024, reflecting a CAGR of 28.7% from 2020 to 2024 [24][27]. - The recycling penetration rate for 3C products in China is only 4.4% as of 2024, indicating significant room for growth compared to developed countries [2][24]. Company Advantages - The company’s competitive edge lies in its vertical integration of the entire industry chain, creating cost and efficiency barriers through resource collaboration [3][20]. - The company has established a strong partnership with JD.com, which significantly reduces customer acquisition costs, with nearly 40% of its recycling sources coming from JD.com [23][19]. Future Growth Prospects - The company plans to expand its store count from approximately 2,000 to over 5,000, which is expected to enhance fulfillment capabilities and drive revenue growth [4][21]. - The company is diversifying its recovery categories, including luxury goods and gold, which could open a second growth curve, with a total market gross profit potential of around 60 billion yuan [4][21]. Financial Projections - The company’s revenue is projected to reach 20.97 billion yuan in 2025 and 26.29 billion yuan in 2026, with a compound annual growth rate of 25.2% from 2025 to 2027 [6][11]. - The adjusted net profit is expected to be 4.06 billion yuan in 2025 and 6.76 billion yuan in 2026, with corresponding adjusted EPS of 1.82 yuan and 3.03 yuan [6][11].