Focusing on Lower-tier Markets, Strategic Transformation Yields Results; AI Drives High-quality Development; Profitability, Operating Cash Flow Significantly Improved, Multiple Key Metrics Hit Record Highs (28 August 2025, Hong Kong) Huitongda Network Co., Ltd ("Huitongda" or "the Group", stock code: 9878.HK), a leading industrial internet platform in China empowering township-based retail stores with its supply chain capabilities and digital technology, is pleased to announce its interim results for the six months ended 30 June 2025 (the "Period"). During the Period, the Group continued to implement its dual-drive strategy, of "Enhancing Quality and Efficiency, and Promoting Innovative Development", as the means to optimize business composition and drive technological advancement. As a result, the Group was able to capture the latest consumption and innovative trends, tapping into new growth areas while delivering significant improvement in profitability. In particular, gross profit margin, net profit margin, and net profit margin attributable to shareholders of the company have all reached historical highs. AI-related revenue contribution has also started from scratch and achieved significant breakthroughs during the Period, highlighting the fact that the Group has entered into a new development stage, shifting from scale-focused to profitability- and sustainability-focused. Across-the-board Improvement in Profit Quality, With Healthy Growth In Cash Flow In the first half of 2025, the Group recorded revenue of RMB24.342 billion. Benefited from its strong focus on efficiency enhancement and proactive measures to streamline low-margin and low-efficiency businesses, the Group has seen significant improvement in profitability with remarkable results: During the Period, the Group reported an operating profit of RMB356 million, a YoY increase of 15.9%, and a net profit attributable to shareholders of the company of RMB139 million, a YoY increase of 10.8%. Gross profit margin also saw notable improvement, rising by 1.1 percentage points YoY to 4.6%, representing a significant YoY growth of 31.4%. Net cash generated from operating activities reached approximately RMB413 million, surging 65.7% compared to the same period last year. Promoting Intelligent Supply Chain Development: Progress Made on Short-chain Distribution and Reverse Supply Chain During the Period, the Group further refined its revenue mix, with revenue contributions from member stores increasing to 47%. The Group also improved its intelligent supply chain system through "Reverse Supply Chain + Short Supply chain + Digital Empowerment ". In February 2025, the Group also launched three major supply chain upgrading projects: "Brand Express Project", "Self-owned Brand Ecosystem Development Project", and "Open Smart Supply Chain Project", in an attempt to further improve the connection and efficiency with upstream and downstream players. Specific measures include: - Deepened collaboration with leading brands such as Gree, Midea, Haier, and Apple, while also bringing in high-quality manufacturers such as Jiangxi Jinzhi, Wuhu Xinmei, and Guangdong Kangbao to expand the supply of high-margin products; - On consumer electronics, the Group has strengthened its cooperation with Apple, with the scale of its O2O business increasing by 203% YoY, and the total number of O2O stores reaching 1,804; - Sales revenue of self-owned brands exceeded RMB80 million, representing a rapid growth of 490.7% YoY. The outstanding performance highlights the breakthrough and substantial benefits of an flexible supply chain model. In addition, the Group is actively expanding into new product categories, including wellness health, elderly-friendly, and quality lifestyle products, and has entered into strategic cooperations with companies such as Oulin Group and BOIN Hearing to jointly explore the emerging consumption needs in China's lower-tier markets. The Group also leveraged its supply chain and industry advantages to expand its online operational capabilities, including e-commerce, social networking, live streaming, content seeding, private domain operations, and cross-border expansion, opening multiple official flagship stores and brand-owned stores on various online platforms. AI+SaaS Strategy in Full Force, Remarkable Results in Member Store Empowerment During the Period, the Group's service business revenue reached RMB312 million. Advancing from traditional "SaaS" to "AI+" with key product launches and progress in customer acquisition, AI-related service revenue achieved a breakthrough in 1H2025, accounting for 20% of total service revenue and becoming a new growth engine of the Group. In April 2025, the Group officially launched its self-developed "Qiancheng AI Super Store Manager" APP, which integrates more than 24 scenario-based AI agents, tackling core business needs including intelligent product selection, marketing and planning, and customer service. The AI agents, officially entered the commercialization stage in May, can help stores automatically complete 60% of daily management work. Sampling shows that, with the help of the AI tools, member stores have seen an average 30% increase in operating efficiency, and a 15-20% reduction in inventory turnover. Continue to Strengthen AI Capabilities, AI Agents See Growing Penetration into Different Business Scenarios Riding on the AI technology revolution, Huitongda actively seized the opportunity to promote the integration of AI and industry applications during the Period, building a full-scenario AI empowerment system covering supply chain, store operations, and terminal services under its "One Cloud + Three Major Projects" strategy framework. In particular, the Group launched the industry's first vertical large model trained for rural commercial scenarios: "Qiancheng Cloud AI". Registered with the Cyberspace Administration of China in May 2025, it became one of the few vertical large models in China with the ability to adapt to the needs of lower-tier markets, supporting the value chain with AI computing and algorithm capabilities. Comprehensive AI Agent Offerings in Place - Intelligent Supply Chain: connecting with more than 500 factories through demand forecasting algorithms to optimize inventory management and supply chain efficiency; - Intelligent Store Operations: using the "Qiancheng AI Super Store Manager" APP to cover 8 key business scenarios such as commodity management, marketing promotion, and customer service, automating 60% of daily management work in the process; - Intelligent Storefront Services: launching AI Cashier terminals, edge computing devices and other hardware and software to provide integrated solutions, driving the digitalized development of member stores. Deepened Ecosystem Collaboration and Accelerating Technological Advancement In August 2025, the Group reached a comprehensive full-stack AI partnership with Alibaba Cloud, integrating Qwen's large model capabilities to jointly develop innovative applications such as the "Large Model Intelligent Agent for Small Stores" and "AI Sales Intelligent Agent." Supported by its accumulated data assets and multidimensional collaboration with Alibaba Cloud in data analysis, the collaboration is expected to yield growing applications across scenarios, while further strengthening its ability to realize the underlying value of data assets. Through its systematic and strategic AI approach, Huitongda is transforming its decade-long data assets into intelligent productivity, gradually building an entry barrier for its AI digital retail operations in China's rural markets. This is expected to lay a solid foundation for improving efficiency and profitability in the future. Fulfilling Social Responsibilities and Growing Recognition During the Period, the Group retained its spot on the "Fortune China 500" list and received numerous honors, including "Key Software Enterprise Encouraged by the State" and "High-Tech Enterprise." The Group also welcomed various site visits, receiving high praise from governments at all levels in Jiangsu Province, showcasing its expanding corporate influence and social recognition. The group's "Wind ESG Rating" was upgraded from BBB to AA, and it has been awarded multiple ESG awards. Future Strategy: Focus on High-quality Growth through Intelligent Development and Global Capital Support Looking into the second half of 2025, the Group will continue to adhere to its principle of "quality improvement, efficiency enhancement and growing towards new horizons", by focusing on the following strategic initiatives: - Advance the Development of Intelligent Supply Chain: On the product front, while continuing to deepen the presence in existing industries, expand high-potential emerging consumer categories in line with new consumption trends, such as hard discount, instant retail, smart home appliances, and elderly-friendly healthcare products. In terms of channel network, the Group will also ride on its established rural family-owned businesses presence, further accelerate the development of online, cross-border, government, and enterprise procurement channels, in an attempt to create a comprehensive coverage; - Promote AI+SaaS Empowerment: on the one hand, deepen its full-stack AI comprehensive cooperation with Alibaba Cloud, accelerate the development and implementation of AI technology and AI agents, and jointly build a "AI+Industry" ecosystem in China's rural markets. On the other hand, accelerate the development and commercialization of AI agents, and expedite the establishment of a full-scenario intelligent Agent matrix. On this basis, the Group will drive the upgrade of the "SaaS+AI+content" integrated servicing model, and introduce a compound pricing model of "standard products + pay-as-you-go + pay-for-performance", promoting rapid growth in AI-related revenue and achieve high-quality, sustainable growth in service income. - Pursue Dual-engine Growth: promote the growing synergy between "industrial development" and "capital operations", with mergers and acquisitions(M&As) as one of the key drivers, and focus on M&A opportunities high-quality companies in supply chains, channel networks, and AI technologies. The Group is confident that it will achieve steady growth in gross profit margin and net profit margin in 2025, laying the foundation for eventual dividend distribution, and creating stable and long-term value to its shareholders. 29/08/2025 Dissemination of a Financial Press Release, transmitted by EQS News. |
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