CICC released a research report stating that considering the recovery in fee rates and profit margin improvements, the firm slightly raised YEAHKA's (09923) adjusted EBITDA forecast for 2025 by 3% to RMB390 million, while maintaining the 2026 adjusted EBITDA forecast at RMB440 million. The company currently trades at 14x/10.5x 2025e/2026e EV/EBITDA. Considering revenue and profit improvements along with improved market sentiment, CICC raised the target price by 65% to HK$15.7, corresponding to 17x/13x 2025e/2026e EV/EBITDA with 20% upside potential, while maintaining the outperform rating.

**Performance Generally in Line with Market Expectations**

YEAHKA's 1H25 total revenue increased 4% year-over-year to RMB1.64 billion; operating profit rose 3% year-over-year to RMB58.8 million; net profit attributable to shareholders surged 36% year-over-year to RMB43.08 million, generally meeting market and the firm's expectations.

**Slight Decline in Payment Processing Volume, Overall Fee Rate Recovery Drives Revenue Growth, Outstanding Overseas Performance**

The company's 1H25 gross payment volume (GPV) decreased 2% year-over-year to RMB1.1 trillion, mainly due to macroeconomic fluctuations impacting average transaction amounts per customer. However, 2Q25 GPV showed sequential growth, initially indicating signs of bottoming out and recovery. Notably, 1H25 overseas business achieved rapid growth with GPV exceeding RMB1.5 billion, already surpassing last year's full-year GPV of approximately RMB1.1 billion.

The company's overall payment processing fee rate recovered, increasing 1bp year-over-year to 12.5bps, offsetting the GPV decline impact and driving payment processing revenue up 6% year-over-year to RMB1.4 billion. As domestic payment business was no longer affected by non-recurring income adjustments and demonstrated profit resilience, 1H25 payment processing business gross margin increased 6.8ppt year-over-year to 13.7%, with overseas business gross margin exceeding 50%.

**Value-Added Services Revenue Decline, Maintaining High Margin Levels**

The company's value-added services include merchant solutions and in-store e-commerce services:

1) Merchant solutions 1H25 revenue declined 8% year-over-year to RMB190 million; gross margin remained at high levels, increasing 0.4ppt year-over-year to 91.3%, mainly benefiting from the company's focus on high-profit customer segments and AI technology applications to enhance product profitability and cost control.

2) In-store e-commerce services 1H25 revenue decreased 11% year-over-year to RMB25.68 million, primarily due to the company's business focus on high-quality and high-profit customers while gradually phasing out low-profit clients. Gross margin declined 14ppt year-over-year to 68%, mainly because large and chain customers served during this period required higher service content with corresponding cost increases. Following comprehensive strategic upgrades, the in-store e-commerce business achieved break-even in 1H25 and maintained monthly profitability consecutively in 2Q25.

**AI Enhancement Improves Operational Efficiency, Effective Financial Management Enhances Profitability; Focus on Global Expansion Progress**

Benefiting from broader AI applications across business lines, 1H25 combined sales, administrative, and R&D expenses decreased 19% year-over-year, with operating profit increasing 3% year-over-year to RMB58.8 million. Additionally, the company actively upgraded its equity structure and optimized financial costs, with 1H25 financing costs declining 53% year-over-year, driving pre-tax profit up 24% year-over-year to RMB45.11 million.

The company obtained federal payment licenses and Arizona state-level payment licenses in the United States, and received formal approval from Japan's Ministry of Economy, Trade and Industry to conduct online and offline QR code payment processing business. The company expects to continue expanding its presence in major global economies.

**Risk Factors:** Intensified market competition, macroeconomic uncertainties, overseas business expansion falling short of expectations, and regulatory tightening risks.