On August 28, China Communications Network (9878.HK) announced its interim report for 2024. The data shows that the company achieved a first-half revenue of 32.86 billion yuan, a net profit attributable to the parent of 0.13 billion yuan, and a steady positive operating cash flow of nearly 0.249 billion yuan. In the slow global economic recovery and domestic macroeconomic fluctuations, the company adjusted its development strategy. It aims to enhance the quality and depth of its operations, demonstrating a stable and high-value development strategy.

A deep analysis of the financial report data reveals profound growth logic and strategic value: the company is gradually unlocking new growth potential and building a more solid foundation for sustainable development in the future, leveraging its continuous innovation in industrial models and deep market development.

Build an independent and controllable supply chain, leading the new trend of industrial upgrades

In the first half of the year, China Communications Network, with the annual core work policy of "stability, quality improvement, and future wins," effectively promoted the transformation and upgrade of its operations and achieved significant results. Its supply chain capabilities steadily improved, which in turn drove the continuous improvement of the company's operational quality, with a year-on-year increase of 0.5 percentage points in gross margin, highlighting the effective improvement of the company's profitability.

Specifically, the company deepened cooperation with top brands in various industries. These include household appliance brands such as Gree, Midea, and Aux, and the addition of brands such as Siemens, Zhongguo Outesi, Apple in the consumer electronics industry, upgrading 1464 township O2O stores, and partnerships with BYD, NIO, and SAIC Motor Corporation in the transportation sector. Additionally, partnerships were formed with flooring brands like Wood Lite and Oasis in the home furnishing industry, and with Unilever in the cleaning industry.

This not only consolidates the company's position in traditional advantageous areas but also further enriches its product line and service range in comparison to other competitors in the market. The company focuses on six major categories: consumer electronics, household appliances, agricultural production materials, transportation, home furnishings, and alcoholic beverages. It offers a rich variety of product categories and is one of the few top service providers covering large durable goods. Currently, the company has established partnerships with over a thousand high-quality brand manufacturers. With its enhanced supply chain capabilities, the combined procurement and distribution model, as well as the extensive downstream resources, are expected to further strengthen the upstream bargaining power and consolidate the procurement cost advantages.

In addition, the company expanded cooperation with resource-based enterprises, including Ningxia Blue Peak in the agricultural materials industry, Hainan Nongken and Jinzhan Wood Industry in the home building materials industry. Meanwhile, it also expanded cooperation with regional retail companies, such as Northeast GOME in the home appliance industry, and provincial supply and marketing cooperatives in Chongqing, Jiangsu, and Anhui in the agricultural materials industry, creating an integrated supply and grain, and supporting a dual-cycle mode for agricultural materials.

The company is also actively expanding its own brand and cooperating with resource-based enterprises. In terms of its own brand, Huitongda has made significant breakthroughs. The company's own brand, 'Altiasha' air conditioners, has achieved mass production, and the volume of orders exceeded 0.016 million units in the first two weeks after its launch. In the agricultural industry, the company has initiated the integrated production and sales project of 'acetyl methylphosphine' to establish independent and controllable production processes and operational management capabilities. Through the construction of its own brand and the promotion of integrated business, the company has implemented the B2F model of 'demand-based procurement, demand-based entry, and demand-based production', greatly improving the efficiency of the urban-rural supply chain.

In the face of new changes in the sinking industry, in addition to deepening its presence in the existing industry, the company is also actively expanding into new industries and product categories. In the washing and daily chemical industry, the company is simultaneously expanding into high-margin categories such as personal care, household cleaning, and cosmetics, in order to further enhance gross profit levels and input-output efficiency. In the new energy industry, the company is developing in the photovoltaic field and co-building a distributed green energy industry platform with leading companies in the industry.

With the increasing demands for operational efficiency and precision customer acquisition in the sinking market, the ToB services in the sinking retail market are expected to further grow in the future. According to Sullivan and the Head Leopard Research Institute, it is estimated that the market size will reach 9.4 trillion yuan by 2027. It can be foreseen that the layout of these new industries and product categories not only brings new growth opportunities for the company, but also further enhances the company's gross profit level and market competitiveness.

Membership service capabilities continue to strengthen, and digital construction is accelerating.

Huitongda Network has always regarded empowering services for rural husband-and-wife stores as its basic foundation. By continuously enhancing its membership service capabilities, it enhances the stickiness and profitability of member stores. Currently, there are approximately 6.3 million husband-and-wife stores nationwide, of which 75% are located in the sinking market. Husband-and-wife stores, as a key component of the sinking market, demonstrate flexibility and resilience due to their small operating scale and low cost input.

With their rich experience and market insights, operators have established deep emotional connections with the community and a loyal customer base, which is an important support for store operations and word-of-mouth promotion. In the warm social environment, husband-and-wife stores not only provide commodity transactions, but also serve as places for community residents to communicate and find emotional support. They have an irreplaceable position in the sinking market and serve as the connection between commodity distribution terminals, community culture inheritance, and emotional connections.

Therefore, for industry internet platforms like Huitongda Network, deeply understanding and empowering small convenience stores is the key to expanding the sinking market, improving supply chain efficiency, building industrial ecology, and promoting the integrated development of urban and rural areas. By providing digital tools, supply chain resources, marketing training, and other support, Huitongda helps small convenience stores transform and upgrade, improve operational efficiency and profitability, and explore the vast space of sinking markets.

Data shows that in the first half of 2024, the company's service revenue increased by 12.0% YoY, SaaS + subscription users increased by 5.1% YoY, paid SaaS + users increased by 28.8% YoY, and storefront SaaS + subscription revenue increased by 13.6% YoY. The growth of these data not only reflects the significant improvement in the company's membership service capabilities, but also demonstrates the huge potential of the sinking market retail industry.

In order to further improve the operational efficiency of member stores, Huitongda focuses on the upgrade direction of 'hot products + AI', researches and develops system tools, and insists on going deep into the front line to organize high-frequency and effective training and activities. At the same time, the company also continuously promotes large customer services, expands the network and coverage of member stores, and provides better products, tools, marketing, training, and data empowerment for member stores.

In terms of digital construction, Huitongda Network has always been at the forefront of the industry. The company has not only built an industry trading platform to help brand manufacturers reach the sinking market but also deeply applied AI technology to optimize service efficiency.

By launching features such as 'digital live streaming rooms' and 'multi-level distribution', the company gradually opens up platform warehousing and logistics services to merchants, and cooperates with 'integrated production and sales' to build an online integrated ordering and production scheduling system. The application of these digital tools not only improves the company's operational efficiency but also brings more convenience and benefits to member stores.

Ending section:

In the current market environment, with the wave of online and offline integration and the transformation of the entire channel, the retail industry in the sinking market, Huotongda Network is actively responding to this trend, seizing unprecedented development opportunities with its unique supply chain integration strength, deep cultivation of membership services, and forward-looking layout of digital construction. Through deepening strategic cooperation with top brands in various industries, the company has not only consolidated its existing market position, but also boldly explored new industries and product categories, and successfully launched its own brand business. These measures have greatly enhanced its market competitiveness and laid a solid foundation for the company's long-term development.

The continuous business innovation capability demonstrated by Huotongda Network is the key to its continuous advancement in the market environment. This innovation capability is not only reflected in the optimization and upgrading of existing businesses, but also in the company's ability to keenly perceive market changes, capture emerging opportunities in a timely manner, and continuously innovate models in line with market development.

Looking ahead, the company will adhere to its original intention and continue to focus on the three core strategic directions of supply chain optimization, empowerment of member stores, and digital upgrading, continuously deepening industrial upgrading and digital transformation. On the road to high-quality development, the company is steadily moving forward, creating more generous returns for shareholders and providing customers with better service experiences. The future is promising.