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Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>Resilience in the face of macro headwinds. Persistently weak consumer sentiment (see Figure 1), combined with the impact of increased regulatory oversight in the healthcare system as the national government addresses corruption and Medicare fraud in pharmacies, have put both upstream and downstream partners in 111’s supply chain ecosystem under pressure.</li><li>According to a source cited by management, China’s retail pharmacy sector sales were down 2.2% Y/Y in the first nine months of 2024 (see Figure 2), with large chain pharmacies operating under financial pressure and independent pharmacies with their more limited resources coming under even greater pressure.</li><li>Despite these macro headwinds, 111’s revenue base has demonstrated some resilience. The revenue generated by its B2B platform dropped modestly by 1.2% Y/Y in 3Q24 and declined by less than 2% Y/Y in the first nine months of the year, a drop accentuated by the reported 3.7% Y/Y dip in 1Q24 due to an unfavorable comparison arising from the unexpected surge in sales in 1Q23 as a result of a resurgence in COVID infections.</li></ul>

Resilience in the face of macro headwinds. Persistently weak consumer sentiment (see Figure 1), combined with the impact of increased regulatory oversight in the healthcare system as the national government addresses corruption and Medicare fraud in pharmacies, have put both upstream and downstream partners in 111’s supply chain ecosystem under pressure.According to a source cited by management, China’s retail pharmacy sector sales were down 2.2% Y/Y in the first nine months of 2024 (see Figure 2), with large chain pharmacies operating under financial pressure and independent pharmacies with their more limited resources coming under even greater pressure.Despite these macro headwinds, 111’s revenue base has demonstrated some resilience. The revenue generated by its B2B platform dropped modestly by 1.2% Y/Y in 3Q24 and declined by less than 2% Y/Y in the first nine months of the year, a drop accentuated by the reported 3.7% Y/Y dip in 1Q24 due to an unfavorable comparison arising from the unexpected surge in sales in 1Q23 as a result of a resurgence in COVID infections.

111, Inc. - YI: Resilience Amid Short-Term Challenges

111 Inc

111, Inc. - YI: Resilience Amid Short-Term Challenges