This report is read as follows:

The company reported three quarters in 2021, revenue continued to recover, but the cost side of the upside eroded profits.

Main points of investment:

Maintain the "overweight" rating. 2021Q3 achieved revenue of 6.136 billion, an increase of 31.79%, and a net profit of 479 million, an increase of 12.07%, lower than market expectations. Taking into account the upside impact on the cost side, we downgrade the EPS forecast for 2021-2023 to 1.25,1.47,1.66 (- 0.12,0.17,0.28). According to the 22-year average PE valuation of comparable companies, we lower the target price to 22.05RMB (- 6.26RMB).

Revenue growth continues to recover and B-end business continues to grow. Q3 achieved revenue of 2.572 billion, an increase of 21.60% over the same period last year. We expect the growth rate of Q3 C and B to be about 10% and 30%.

We observe that at the beginning of Q2, the company's retail has returned to the normal growth platform of about 10%, while looking forward to the Q4 and 22 years of the market, the retail base effect will be significantly improved, and the overall retail growth pressure will likely appear. We expect that although the company's B side is affected by the industry in the short term, the company has cautiously slowed down some of its growth, but it is still expected to maintain a growth rate of about 20%, becoming the most important driver of the company's performance.

The cost side goes up to the gross margin pressure. We believe that excluding the impact of accounting policies, the company's overall gross profit margin in the first three quarters was 33.78%, down 3.56 percentage points from the same period last year. We believe that it is mainly affected by higher commodity prices and higher shipping costs. As a result, the company's net interest rate fell 1.29 percentage points year-on-year to 8.02%.

The operation is still sound. By the end of the reporting period, the company had 2.234 billion cash on hand, an increase of 327 million over the same period last year; the sales-to-cash ratio was 98%, reflecting the control of the company's C-terminal genes on payback; and the operating net cash flow was 285 million, higher than the net profit, and the operation continued to be sound.

Risk hint: the risk of sharp decline in real estate investment and rising cost of raw materials