The mid-year reporting season has come to an end. Overall, with the uncertainty of the global environment and the weakness of consumer demand, it has become more common for companies in related fields to face performance pressure, making it not easy to maintain robust or relatively robust performance. Compared to mere data, the evolution of growth logic in financial reports is also more worth paying attention to, as it concerns whether they can overtake in the future.
From this perspective, Huitongda Network is one of the targets worth dissecting. It not only has a robust fundamental base but also actively adjusts its strategy, injecting new expected space.
Three "Safety Lines"
Robustly, Huitongda Network has three "safety lines."
Firstly, the business foundation is robust.
Huitongda Network pioneered the "platform + member store" business model, empowering rural couple shops with supply chain capabilities and digital technology services, forming a solid foundation. The market demand it anchors is the transformation and upgrading needs of rural couple shops, which have a certain resilience and flexibility.
It can be seen that, in comparison, the domestic lower-tier market has burst out with greater vitality, and the growth rate of income and consumption of rural residents in the first half of the year is also better than the urban market, which is expected to continue to be released. Currently, there are about 6.3 million couple shops nationwide, 75% of which are located in the lower-tier market. The fundamental reason for the long-term survival of couple shops is good quality and affordable prices. Couple shops that rely on platforms with strong digital technology and supply chain capabilities can enhance their competitiveness, which is a rigid demand.
Moreover, Huitongda Network covers a wide range of categories and is one of the few leading service providers covering large durable goods, with strong enabling capabilities, which can better meet the service needs of couple shops.
The growth in service business revenue and customer scale also strongly proves this point. In the first half of the year, Huitongda Network's service business revenue increased by 12.0% year-on-year, SaaS+ subscription users increased by 5.1% year-on-year, paid SaaS+ users increased by 28.8% year-on-year, and store SaaS+ subscription revenue increased by 13.6% year-on-year.
Secondly, the financial condition is generally healthy.Financial reports indicate that Huitongda Network achieved a revenue of 32.86 billion yuan in the first half of the year, with a net profit attributable to the parent company of 130 million yuan, and a robust operating cash flow inflow of nearly 249 million yuan. In the current market environment, profitability and cash flow are more important, serving as the cornerstone for survival and development to ensure that the company can achieve sustainable and high-quality growth.
Thirdly, the stock price is at a historical low.
The closing price of Huitongda Network on August 30 was 20.25 Hong Kong dollars, which is at a historical low and significantly lower than the consensus target price of 396.1 Hong Kong dollars set by institutions, equivalent to a potential increase space of over 48%. The corresponding valuation has also retreated to a historical low, further thickening the investment "safety cushion."
Upward elasticity is expected.
Huitongda Network is also continuously promoting the innovation and upgrading of its model. In the first half of the year, it actively sought transformation, fully promoted industrial upgrading, and built a more autonomous and controllable supply chain capability, while continuously improving customer service value and platform capabilities. The transition period has had a short-term impact on its performance, but it also releases long-term upward elasticity space.
Specifically, in terms of the supply chain, Huitongda Network focuses on three directions: 1) deepening the level of brand cooperation; 2) promoting the integration of production and sales with its own brands; 3) adjusting and optimizing the structure of secondary categories in various industries to better meet customer needs and jointly promote the improvement of gross profit levels.
In the first half of the year, Huitongda Network deepened cooperation with top brands in various industries, such as Gree, Midea, AUX, Siemens, Zhongguang OUTESI, Apple, BYD, NIO, SAIC Group, WOGELI Flooring, Oasis Flooring, Unilever, etc. At the same time, it expanded cooperation with resource-based enterprises, such as Ningxia Lanfeng, Hainan State Farms, and Jinzhan Wood Industry; and expanded cooperation with regional retail enterprises, including deepening business cooperation with provincial supply and marketing cooperatives in Chongqing, Jiangsu, Anhui, and other places.
During the same period, Huitongda Network's own brand "Altisha" air conditioner had orders exceeding 16,000 sets within two weeks after its launch, and the production and sales integration of "Zhonghuida" intelligent manufacturing factory continued to climb. In the agricultural supply industry, the "acephate" production and sales integration project was launched, continuing to implement the B2F model of demand-driven procurement, import, and production, and improving the efficiency of the entire supply chain in urban and rural areas.
Huitongda Network is also actively expanding into new industries and categories, such as expanding into high-gross-margin categories such as personal care, home cleaning, and beauty in the washing and daily use industry, and deploying in the photovoltaic track in the new energy industry.In the realm of member empowerment services, Huitongda Network has comprehensively upgraded its SaaS+ products, transitioning to a "Empowerment + Open Platform" business model. Behind this shift, Huitongda Network has focused on "Best-sellers + AI" for the research and development of system tools, organizing high-frequency and effective training and activities. Concurrently, by leveraging its own supply chain resources, it provides more efficient full-chain empowerment for member stores, enhancing their operational efficiency. Furthermore, by utilizing the robust digital empowerment of "Digitalization + Cloud Chain," the network and service capabilities of member stores are improved.
It is reported that Huitongda Network will also launch features such as "Digital Human Live Broadcast Rooms" and "Multi-level Distribution," gradually opening platform warehousing and logistics services to merchants, and in conjunction with "Production and Sales Integration," building an online centralized order scheduling system.
From this, it can be seen that Huitongda Network is expected to continue to strengthen the bilateral network effect in the future, attracting more mom-and-pop stores and brand manufacturers into the ecosystem, thereby consolidating its market leadership. With the increasing significance of scale effects and the upgrade of digital capabilities, Huitongda Network also has a greater opportunity to achieve cost reduction and efficiency enhancement. For instance, it can continuously strengthen its industrial discourse power, achieve more precise demand matching, and enhance profitability.
In conclusion, Huitongda Network maintains a "safety line" for sustainable development while innovating and exploring flexibly upward, opening up a vast space for elasticity, and still possesses long-term investment value.
Additionally, drawing on historical experience, excellent companies are mostly driven by strategy rather than solely following operational numbers. Although strategic adjustments may bring short-term performance pressure, they often lead to significant performance improvements and competitive advantages in the long run. The proactive adjustments made by Huitongda Network may be paving a viable path towards overtaking in the future.
- 16 October'24
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