Pou Sheng International (3813) Q2 2024 earnings summary

Executive summary

• Revenue for 1H24 declined 8.9% year-over-year to RMB9,983.3 million due to weak store traffic and a high base effect from last year's post-pandemic rebound.

• Gross profit margin improved by 0.7ppt to 34.2%, with gross profit at RMB3,415.7 million, supported by disciplined discounting and inventory management.

• Net profit attributable to owners rose 9.9% to RMB335.7 million, with operating profit up 2.1% to RMB482.6 million and net margin up 0.6ppt to 3.4%.

• Interim and special dividends totaling HK$0.04 per share were declared, with a 60% payout ratio.

• Digital transformation, disciplined cost controls, and working capital efficiency contributed to profitability and cash flow improvements.

Financial highlights

• Cost of sales decreased 9.9% year-over-year, supporting margin expansion.

• SG&A expenses fell 7.8% year-over-year, with the SG&A ratio at 30.6% of revenue.

• Net finance cost dropped 77.1% year-over-year, with net finance income of RMB26.5 million in 1H24.

• EBITDA for 1H24 was RMB1,066.9 million, down 5.9% year-over-year; capital expenditure rose 11.8% to RMB190.8 million.

• Free cash flow reached RMB682.5 million, and ending cash balance was RMB3,108.4 million as of June 30, 2024.

Outlook and guidance

• Focus remains on profitability, cost competitiveness, and digital transformation, with ongoing SAP ERP upgrades and omni-channel integration.

• Digital sales contribution is targeted to remain above 25%, with continued expansion of brand partnerships and membership operations.

• Plans to expand new store concepts and mono-brand stores, and leverage AI tools for operational efficiency.

• Industry growth is anticipated from major sports events and government support, despite macroeconomic headwinds.