Shenwan Hongyuan has released a research report maintaining an "Overweight" rating on EAST BUY (01797). The rating is supported by the company's active advancement of a multi-livestreaming room and multi-host strategy, continuous development of high-margin proprietary products, and its content advantages within the GEO marketing environment, leading to a robust improvement in the gross profit margin for 1HFY26. The firm has raised its adjusted net profit forecasts for FY26 to FY28 to 500 million/590 million/720 million yuan (from previous estimates of 410 million/490 million/600 million yuan) and increased the target price to HK$25.4 (from HK$23.1 previously). Shenwan Hongyuan's key viewpoints are as follows: EAST BUY's revenue for 1HFY26 (June 2025 to November 2025) reached 2.31 billion yuan, a year-on-year increase of 5.7%; net profit attributable to shareholders was 239 million yuan, turning a profit compared to a loss in the same period last year. The company's revenue growth was primarily driven by increased sales of proprietary products, while the return to profitability stemmed from improvements in product gross margins. The company's GMV for 1HFY26 was 4.1 billion yuan, a year-on-year decrease of 14.6%. Of this GMV, proprietary products contributed 2.16 billion yuan, while sales of third-party products represented 1.94 billion yuan. Excluding the GMV from the "Yu Hui Tong Xing" livestreaming room in 1HFY25 (which was spun off in August 2024) for a comparable base, the livestreaming GMV from the Douyin platform turned positive year-on-year in July 2025 and continued to grow through November 2025. During 1HFY26, the company persistently developed new proprietary products, with the count reaching 801, an increase of approximately 9.4% from the 732 available at the end of FY25. With deeper supply chain expansion and a broadening of proprietary product categories, the gross profit margin for proprietary products is projected to rise to 33.7% in 1HFY26, up 12.3 percentage points from 21.5% in 1HFY25. Concurrently, the development of new proprietary products has shifted from a focus on quantity to pursuing high repurchase rates, thereby driving larger procurement volumes per product, reducing the unit cost of raw materials or finished goods, and contributing to the gross margin improvement. EAST BUY continues to launch new accounts on Douyin and plans to initiate a long-term recruitment program to attract new hosts. Simultaneously, the company has also established online stores on various platforms including WeChat Mini Programs, WeChat Shops, Tmall, JD.com, Pinduoduo, and Xiaohongshu. In 2026, the company's first offline experience store is set to open in Beijing's Zhongguancun, marking another step in deepening its channel strategy. The EAST BUY app is estimated to have over 300,000 paying members in 1HFY26, showing continued growth from the 264,000 at the end of FY25. Given that the company's Douyin accounts collectively have 42.79 million followers (counting only the six main matrix accounts: EAST BUY main account, Books, Proprietary Products, Beautiful Life, Fresh Produce, and Apparel, as of November 30, 2025), this substantial follower base provides a vast foundation for expanding the number of paying users. The institution anticipates that the number of paying users will continue to grow in the future, thereby driving the company's GMV growth. Risks include a potential decline in the quality of EAST BUY's content, which could lead to reduced user stickiness and negatively impact GMV.
Comments