CICC: Maintain an "Outperform" rating on EAST BUY (01797) with a target price raised to 20 Hong Kong dollars.

China Everbright Securities released a research report stating that they are optimistic about the development prospects of EAST BUY (01797) self-operated products and multi-channel strategy, maintaining an "outperform industry" rating; due to more optimistic growth expectations and the recovery of market risk preferences, they have raised the target price by 74% to HK$20. Considering that the growth rate of self-operated products accounted for by total revenue is more moderate than the bank's expectations, they have lowered the FY25/26 revenue by 32.9%/28.8% to HK$3.83 billion/HK$4.51 billion; and adjusted the net profit attributable to shareholders downwards by 28.4%/39.8% to HK$151 million/HK$227 million. EAST BUY announced its 1HFY25 performance: on a comparable basis, the operating revenue of continuing operations decreased by 9.3% to HK$2.19 billion year-on-year, and the adjusted net loss attributable to shareholders was HK$1.905 million, which basically meets the bank's expectations. According to the performance announcement, after excluding the financial impact of the sale of the Hui Tong business, the operating revenue of continuing operations of the company during the reporting period was approximately HK$2 billion, with a net profit of approximately HK$3.27 million. Main points of China Everbright Securities: The multi-platform and multi-matrix strategy support business resilience. In 1HFY25, the GMV of self-operated products and live broadcasting business revenue reached HK$4.76 billion, a year-on-year decrease of 16.2%, which was relatively controllable considering the decline background of the sale of Hui Tong. The company's multi-channel strategy has driven rapid growth in self-operated products, with self-operated product GMV accounting for 37.0% of total GMV in 1HFY25, becoming the main growth driver for the company; the variety of self-operated products continues to increase, with the number of SKUs increasing from 488 in FY24 to 600. In terms of online channels, in addition to the traditional advantage of the Douyin platform, the company plans to seize the opportunity of the launch of WeChat's "Blue Pack" primary entrance to strengthen the WeChat e-commerce ecosystem. In addition, the company's own APP strategy layout is progressing rapidly, with the category coverage continuing to expand, increasing the number and activity of members through various marketing activities, with the GMV proportion of own APP reaching 13.6% during the period. The company has also begun exploring offline channels, selling products through vending machines in New Oriental learning centers. Looking forward to FY25, with the gradual digestion of the impact of the divestment from Hui Tong, online and offline multi-channel, multi-platform, and multi-matrix efforts continue to strengthen. The bank has raised its FY25 full-year GMV forecast from HK$7.3 billion to HK$7.8 billion. The operational health of the self-operated business continues to improve. In 1HFY25, the gross profit margin of continuing operations was 33.6%, an increase of approximately 0.7 percentage points year-on-year on a comparable basis; the gross profit margin of self-operated products rebounded significantly, mainly due to the reduction in discount promotion intensity combined with the increase in the proportion of high-margin self-operated product categories. During the period, the company recorded a net loss of HK$96.5 million; after excluding one-time expenses related to the sale of Hui Tong, the remaining business recorded a net profit of HK$3.27 million, representing an approximately 2% net profit margin. Risk: Intensified competition in the live e-commerce industry; self-operated products may not meet expectations.