Sun Art Retail Group (6808) H1 24/25 earnings summary

Executive summary

• Revenue for H1 2024 was RMB34,708 million, down 3.0% year-over-year, mainly due to store closures and scaling down of supply chain business.

• Achieved a turnaround to profitability with net profit of RMB186 million, compared to a net loss of RMB378 million in the prior year period.

• Operating profit surged to RMB621 million from RMB19 million, driven by cost control and improved operational efficiency.

• Implemented a "Back to the roots" strategy, focusing on product quality, price competitiveness, and operational efficiency.

• No interim dividend declared due to ongoing offer period and need for further assessment.

Financial highlights

• Gross profit was RMB8,526 million, down 4.1% year-over-year; gross margin decreased to 24.6%.

• EBIT margin reached 1.8%, with EBIT at RMB621 million, up from RMB19 million year-over-year.

• Basic and diluted EPS was RMB0.02, compared to a loss per share of RMB0.04 in the prior year.

• Net cash position was RMB14,635 million as of 30 September 2024, down from RMB16,504 million at 31 March 2024.

• Inventory turnover improved to 54 days, and trade payable turnover improved to 76 days.

Outlook and guidance

• Management expects continued organic growth, with focus on efficiency, cost control, and further store rationalization.

• Continued focus on expanding superstores and membership clubs, with selective hypermarket openings.

• Ongoing investment in private label and fresh product categories to differentiate and drive traffic.

• Emphasis on omni-channel development and supply chain optimization to drive the second growth curve.

• Management expects gradual return to organic growth, with emphasis on customer value and operational excellence.