Core Viewpoint - Yonghui Supermarket's revenue for the first three quarters of 2025 decreased by 22.2% year-on-year, with significant pressure on profits. The company is actively upgrading its supply chain and optimizing its store operations, indicating a strategic shift towards quality retail despite short-term performance challenges [1] Group 1: Financial Performance - Revenue for the first three quarters of 2025 decreased by 22.2% year-on-year [1] - Profitability is under significant pressure due to the revenue decline [1] Group 2: Supply Chain and Vendor Management - The company is continuously upgrading its supply chain and has streamlined its supplier system, achieving a supplier elimination rate of 40.4% by Q3 2025 [1] - The direct sourcing model has shown positive results, with sales of the aquatic product, Chinese mitten crab, reaching 44.53 million yuan in Q3 2025, a year-on-year increase of 195% [1] Group 3: Private Label Development - The company is accelerating the development of its private label products as part of its "product centralization" strategy, having launched 15 quality items across fresh produce, 3R, and standard product categories by the end of October [1] Group 4: Store Optimization - As of the end of September 2025, the company has remodeled 222 stores, with the remodeling process significantly accelerating and entering a systematic and scalable phase [1] - The transition towards quality retail is progressing smoothly, indicating a focus on supply chain reform and store optimization [1]

Macroeconomic Overview - In May, industrial added value increased by 5.8% year-on-year, exceeding expectations of 5.7%, but down 0.3 percentage points from April. Cumulative growth from January to May is up 0.5% compared to last year [2] - Retail sales of consumer goods in May saw a nominal growth of 5.1%, surpassing the expected 4.9%, and rebounding 1.3 percentage points from April. The cumulative value from January to May is up 1.5% year-on-year [2] - Fixed asset investment growth from January to May was 3.7%, below the expected 4.0%, and down 0.3 percentage points from January to April, but still up 0.5% year-on-year [2] - The real estate investment growth rate from January to May was -10.7%, down 0.4 percentage points from January to April, and down 0.1% year-on-year [2][4] Industry Insights - China Southern Airlines reported a passenger load factor of 85.91% in May, up 2.73 percentage points year-on-year. The passenger turnover volume increased by 8.43% year-on-year, with domestic and international segments growing by 4.65% and 21.54%, respectively [8] - The sales of tower cranes in May were 538 units, down 28.4% year-on-year, with domestic sales dropping by 51.7%. However, exports increased by 67.3%. Cumulative sales from January to May were 2,334 units, down 36.6% year-on-year [9] - Forklift sales in May reached 123,472 units, up 11.8% year-on-year, with domestic sales increasing by 9.25% and exports by 16.6%. Cumulative sales from January to May were 601,764 units, up 9.33% year-on-year [9] Advanced Manufacturing Developments - Zhuhai Guanyu Group has made significant progress in the field of new energy with the establishment of a solid-state lithium battery experimental line, addressing key challenges in the development of solid-state batteries [11] - The new platform supports the entire process of material synthesis, interface optimization, and cell trial production, significantly shortening the R&D cycle and marking a critical step towards industrialization [11] - If mass production of solid-state batteries occurs as planned in 2026, it could replicate the domestic substitution path seen in consumer batteries [11] Consumer Sector Changes - Yonghui Supermarket has initiated a comprehensive transformation based on the "Fat Donglai" model, optimizing product supply, enhancing service experience, and improving employee welfare [13] - As of June 2025, over 100 stores have completed the transformation, with a significant increase in the proportion of new products, particularly in fresh food categories [13] - Employee wages have been raised by over 30%, and working hours are limited to 8 hours per day, which has improved employee service motivation [13]

Investment Rating - The investment rating for Yonghui Supermarket is "Buy" (maintained) [1] Core Views - The company has experienced significant pressure on its operating performance due to store renovations, with a reported revenue of 67.574 billion yuan in 2024, down 14.1% year-on-year, and a net profit attributable to shareholders of -1.465 billion yuan [4] - In Q1 2025, the company achieved a revenue of 17.479 billion yuan, a decrease of 19.3%, but a net profit of 148 million yuan, indicating a significant decline of 80% [4] - The company is transitioning towards quality retail, with 41 out of 47 renovated stores achieving stable profitability, and plans to accelerate this transformation [6] Financial Performance Summary - In 2024, the retail and service sectors generated revenues of 63.768 billion yuan and 3.806 billion yuan, respectively, reflecting declines of 13.5% and 22.8% year-on-year [5] - The company’s gross margin for 2024 was 20.5%, down 0.8 percentage points, primarily due to proactive pricing strategies during the optimization of product structure and procurement [5] - The projected net profits for 2025-2027 are -738 million yuan, 410 million yuan, and 1.195 billion yuan, respectively, with corresponding EPS of -0.08, 0.05, and 0.13 yuan [4][8] Store Renovation and Strategy - The company aims to focus on core suppliers and major products, with a target of developing 100 billion-yuan products, while avoiding arbitrary supplier changes [6] - By the end of March 2025, the company had renovated 47 stores, with expectations to exceed 124 renovated stores by June 2025 and reach 300 by the Lunar New Year in 2026 [6]