Daiwa: EAST BUY (01797) GMV improvement upgraded to "outperform the market" rating

Yamato released a research report stating that the total Gross Merchandise Volume (GMV) of EAST BUY (01797) in the first half of the 2025 fiscal year was 4.8 billion RMB, with the "Along with Hui" channel led by Dong Yuhui contributing a quarter of the total amount. However, after Dong Yuhui resigned, the bank noticed that EAST BUY's GMV had rebounded with the expansion of sales channels. Based on the GMV recovery, the bank upgraded EAST BUY's rating from "underperform" to "outperform" the market, with a target price raised from 11 HK dollars to 13.5 HK dollars, and lowered its revenue forecast for the current and next fiscal year by 11% to 18%, and its earnings per share forecast by 34% to 77%. Due to reduced discounts, the gross profit margin of EAST BUY's own brand products in the first half of fiscal year 2025 rebounded to a healthy level of 21%, a significant increase from 10% in the second half of fiscal year 2024. With the group reducing manpower since December last year and expanding products to categories with high gross margins such as health supplements and pet products, the bank expects a further improvement in profit margin in the second half of fiscal year 2025.