Guosen Trade Retail September Strategy and Mid-term Summary: Overall industry performance is flat, focusing on structural economic direction.

Guosen released a research report stating that current overall consumption is still in a gradual recovery trend. The industry fundamentals in the interim report are relatively flat. In the short term, it is recommended to continue to focus on finding structural investment opportunities, along with capturing individual stock relative returns based on policy themes. In the medium to long term, continue to layout in the direction of the relatively clear prospects of the rise of domestic products and expansion overseas. Specifically: 1) Beauty and personal care: After sufficient adjustments, the attractiveness of some targets' valuations is gradually becoming apparent. Top domestic brands have shown strong growth resilience in the first half of the year due to strong product capabilities and omnichannel distribution. Recommended Guangdong Marubi Biotechnology (603983.SH) and others; 2) Cross-border expansion: Overseas consumer demand remains relatively high, and although there are unstable factors such as changes in the international trade environment in the short term, leading enterprises are expected to gain higher market share through refined operational layouts in the industry. Recommended: Zhejiang China Commodities City Group (600415.SH) and others; 3) Gold and jewelry: Short-term fluctuations in gold prices may cause disturbances in the release of end consumer demand. However, the dual attributes of gold as a value-preserving asset and accessory will be further highlighted in the current consumption environment. Recommended: Lao Feng Xiang (600612.SH) and others; 4) Offline retail: Leading enterprises are actively responding to changes in cost-effective consumption trends by transforming operations and exploring new growth drivers through external partnerships and capital tools. Recommended: Shanghai Bailian Group (600827.SH) and others. Guosen's main points are as follows: Since 2024, overall consumption has continued a low-level recovery trend. In the first half of 2024, the total social retail sales reached 23.6 trillion yuan, up 3.7% year-on-year, slightly slowing from the 4.7% growth in Q1. In the first half of the year, retail sales of goods and services increased by 3.2% and 7.5% year-on-year, respectively. The overall trend of low-level recovery in commodity consumption continues, and there is still potential for further recovery in household consumption and consumer confidence. Online consumption growth is slowing down, but penetration rate is continuously increasing. In the first half of the year, the national online retail sales increased by 9.8% year-on-year, slowing down from the 12.4% growth in Q1, but still outperforming the overall consumption market. Physical goods online retail sales increased by 8.8% year-on-year in the first half of the year, accounting for 25.3% of the total social retail sales. By platform, according to Jiuqian data, Tmall and Douyin achieved sales growth of 1.1% and 31.8% in the first half of the year, respectively. Tmall achieved a revenue growth of 6.2% in Q2 after internal adjustments, turning positive for the first time; Douyin continued to grow rapidly. Offline consumption continues to be weak, market remains under pressure. After the release of offline consumption demand following the lifting of the epidemic last year, the base number is relatively high, and domestic consumption power is still waiting to be released, with significant pressure on prices. Therefore, the overall data performance is average. In terms of listed company performance, most companies saw a decline in revenue in Q2, and profitability continued to decline due to pricing pressures. The sector's market performance also reflects the fundamental trend. As of September 10, SW general retail sector lagged the market by 14.6% year-to-date. Cross-border e-commerce performance remains strong, sector's market performance affected by changes in the international situation. According to preliminary statistics from the General Administration of Customs, in the first half of 2024, China's cross-border e-commerce exports reached 1.22 trillion yuan, a year-on-year increase of 10.5%. The overall prosperity of the cross-border industry remains high, and major listed companies also achieved accelerated growth in revenue in the first half of the year, but there are significant differences in profitability due to factors such as freight and non-recurring expenses. The cross-border e-commerce sector has seen significant fluctuations this year, mainly due to intensified market concerns about future trade policies resulting from changes in the international situation. However, in the long term, the operational resilience of leading targets will gradually be reflected. Risk warnings: Consumption recovery falls short of expectations; intensifying industry competition; changes in company management, etc.