Group 1 - Company experienced an 8.3% year-on-year decline in revenue, totaling 9.16 billion RMB, due to fluctuating store traffic and increased discounts [1] - Gross margin decreased by 0.7 percentage points to 33.5%, while net profit fell by 44% year-on-year to 190 million RMB, resulting in a net profit margin of 2.1% [1] - Inventory levels remained healthy, with inventory days at 146, below the target of 150 days, and old inventory accounting for less than 9% [1] Group 2 - Online sales showed robust growth of 16%, with live streaming sales exceeding 100% growth, contributing to 33% of total revenue [2] - The company maintained its offline store count at 3,408, with a net closure of 40 stores, while same-store sales declined by 10% to 20% [2] - The company plans to optimize its product mix and develop proprietary brands, with short-term revenue contribution from these brands at only 2-3% [2]

Investment Rating - The investment rating for the company is "Outperform the Market" [4][6][34] Core Views - The company experienced an 8.3% year-on-year decline in revenue to 9.16 billion RMB in the first half of the year, primarily due to increased discounts and a drop in customer traffic [1][4] - The gross profit margin decreased by 0.7 percentage points to 33.5%, leading to a 44.0% year-on-year decline in net profit to 190 million RMB [1][4] - The company maintains a healthy inventory level with an average inventory turnover of 146 days, keeping within the target of 150 days [1][4] - Online sales showed a robust growth of 16%, with live streaming sales exceeding 100% growth, contributing to 33% of total revenue [3][4] - The company plans to optimize its product mix and develop its own brands to enhance sales performance [3][4] Summary by Sections Financial Performance - Revenue for the first half of the year decreased by 8.3% to 9.16 billion RMB, with a net profit decline of 44.0% to 190 million RMB [1][4] - In the second quarter, revenue fell by 11.6% to 4.05 billion RMB, but the gross margin improved by 1.8 percentage points quarter-on-quarter to 34.5% [2][4] - The company has a stable cash level of 2.7 billion RMB and plans to distribute an interim and special dividend of 0.23 HKD per share, with a payout ratio of 60% [1][4] Channel Performance - Online channels showed a 16% increase in revenue, while offline store sales were negatively impacted by reduced customer traffic, with same-store sales down by 10% to 20% [3][4] - The company closed 40 stores, bringing the total to 3,408, a 2.0% year-on-year decrease [3][4] Future Outlook - The company expects to stabilize profitability despite current revenue pressures, with a forecasted net profit of 390 million RMB in 2025, down 21% year-on-year, but projected to recover by 21% in 2026 and 11% in 2027 [4][32] - The target price is maintained at 0.59 to 0.69 HKD, corresponding to a 6-7x PE for 2026 [4][32]