Daiwa has released a research report stating that, based on EAST BUY's (01797) better-than-expected Gross Merchandise Volume (GMV) and gross margin performance, it has raised its profit forecasts for the group for the current and next fiscal years by 42% to 97%.

Considering the recovery in GMV, the firm has reiterated its "Outperform" rating and increased its new 12-month target price from HK$13.5 to HK$29, based on applying a price-to-earnings (P/E) ratio of 32 times to the average earnings per share for the current and next fiscal years (previously 23 times).

EAST BUY announced its financial results for the first half of fiscal year 2026, reporting an adjusted net profit of RMB 257 million, a turnaround from a loss in the same period last year.

The robust gross margin performance of 36% was a key positive, with the gross margin for its own brands expanding from 24% to 29%, primarily driven by economies of scale and contributions from high-margin product categories such as health, nutrition, and daily consumer goods.

Daiwa indicated that its view on the group has turned more positive following the earnings release, believing that the company has navigated through operational challenges.

With its own brands developing well, structural reductions in operating costs, and the launch of non-Douyin sales channels providing significant options for growth, Daiwa believes the stock's risk-reward profile has improved.