Core Viewpoint - The company maintains a positive outlook for FY25E despite a muted retail sales trend in 2025, with a projected sales growth of likely mid-single digits (MSD) and net profit growth, supported by store expansion and strong e-commerce performance [2][3][4]. Financial Performance - In 1H25, the company's sales increased by 5% to RMB 3.16 billion, while net profit rose by 5.5% to RMB 604 million, aligning with estimates [5]. - The operating cash flow saw a 22% year-over-year decline, and inventory increased by 28% year-over-year, but these figures are considered manageable [5]. - The gross profit (GP) margin and operating expenses (opex) were weaker than estimates, but this was offset by better-than-expected other income and a lower tax rate [5]. Retail Sales Trends - Retail sales growth in 2025 is described as muted, with same-store sales growth (SSSG) at 0% in 1H25, primarily due to a weak macro environment and warm winter [2]. - However, retail sales growth turned positive in 4Q24 compared to negative growth in 3Q24, aided by government stimulus and e-commerce efforts [2][3]. Strategic Initiatives - The company opened around 100 new stores in 1H25, representing a 4.4% year-over-year growth, which is an acceleration compared to 1.8% in 2H24 [3]. - E-commerce sales growth continues to outperform offline sales, indicating a shift in consumer purchasing behavior [2][3]. - Management is focused on enhancing customer experience and brand equity, which is expected to gradually increase customer satisfaction and repeat purchase rates [3]. Future Guidance - The company has reiterated its FY25E guidance for positive sales and net profit growth, with a long-term target of RMB 10 billion in retail sales and a 15%+ net profit margin [3][4]. - The forecast includes a 5% sales growth and a 6% net profit growth for FY25E, despite a slight downward revision in profit estimates for FY25E, FY26E, and FY27E [4][5]. Valuation and Investment Outlook - The company maintains a "BUY" rating and has raised the target price to HK$ 18.68, based on a 10x FY25E P/E ratio [4]. - The current trading P/E is 8x FY25E, below the 8-year average of 9x P/E, with an attractive dividend yield of 9% [4].