Main points of investment:

The company released its third quarterly report for 2022, and the results were in line with expectations. 1) from January to September in 2022, the company achieved operating income of 67.924 billion yuan, an increase of 3.98% over the same period last year, and a net profit of 631 million yuan, a decrease of 15.62% over the same period last year. The company realized non-net profit of 587 million yuan, an increase of 14.57% over the same period last year. 2) in the third quarter of 2022, the company achieved operating income of 21.893 billion yuan, a decrease of 16.12% over the same period last year, a net profit of 223 million yuan, a decrease of 49.72% over the same period last year, and a non-net profit of 204 million yuan, a decrease of 13.65%. 3) from January to September 2022, the company's net operating cash flow reached 749 million yuan, a substantial increase of 115.37%. The company's operating income in the third quarter was in line with expectations, excluding the impact of 198 million yuan in investment income generated by the first machine in the third quarter of 21, 22Q3 profits still declined compared with the same period last year, mainly due to lower-than-expected Plus sales of Apple Inc 14 and Apple Inc 14. The increase in operating cash flow of the company is mainly due to the new listing of multi-brands in the same period last year, and the increase in funds paid for the purchase of goods led to a low base of net operating cash flow in the same period last year.

The core cost index is strictly controlled and the profit margin is improved. The company's gross profit margin for sales in the first three quarters of 2022 was 3.3%, an increase in 0.2pct compared with the same period last year. The expense rate during the company period was 2.01%, an increase of 0.14pct over the same period last year; the sales / management / R & D / financial expense rates were 1.53%, 0.27%, 0.02%, 0.19%, respectively, with year-on-year changes + 0.25/-0.12/+0.00/+0.01pct. The company firmly adopts the efficiency-leading strategy, strictly controls the core indicators, and effectively enhances the company's cost competitive advantage. The increase in the rate of sales expenses may be due to the company's active expansion of the new energy sales network and the promotion of the listing of new machines such as Glory and Apple Inc. Under the combined influence, the company's return net profit margin in the first three quarters of 22 years was 0.93%, down 0.22pct from the same period last year, while the non-return net profit margin was 0.87% in the first three quarters, an increase in 0.08pct over the same period last year. The gross profit margin of the company in the third quarter was 3.8%, an increase of 0.65pct over the same period last year, and the sales / management / R & D / financial expense rates in the third quarter were 1.98%, 0.27%, 0.02%, 0.21%, respectively, with year-on-year changes + 0.73/-0.18/+0.01/+0.02pct. Under the combined influence, the company's net profit margin in the third quarter of 22 was 1.02%, down 0.68% from the same period last year, deducting the non-return net interest rate to 0.93% in the third quarter of 22, an increase of 0.03pct over the same period last year.

We will actively distribute consumer goods and new energy car races, and build a multi-level new automobile retail service network. At the end of August, the company carried out strategic cooperation with zero-running cars, with a deep layout in the field of new energy vehicles. According to the sales data in September, the monthly delivery of zero-running cars reached 11039, an increase of more than 200% over the same period last year. It has become a new force in domestic new energy vehicle brands.

The company continues to improve the sales and service network of zero-running cars, relies on its terminal network development plan, and actively participates in the development of zero-running automobile experience centers, delivery centers, service centers and other terminals, so as to help zero-running cars expand the breadth and depth of their channels. continue to lay the foundation for opening sales and winning more market space. The company is expected to empower brands through an integrated online and offline sales and service network, build a multi-level three-dimensional automobile retail service network, and open up the second growth curve.

The company's digital technology capabilities continue to empower, online and offline integrated operation, and deepen cooperation with the brand side. As the channel strategic partner with the largest proportion of shareholders in Glory, the company continued to strengthen its cooperation with Glory Brand this quarter, while the company focused on improving the quality of market operation and expanding the scale of incremental customer business such as operators, government and enterprises. The distribution information system and the new retail platform system realize the end-to-end visual management of information flow, logistics and capital flow, construct the commercial closed loop under B2B2C and O2O mode, and improve the private domain flow and user operation ability. At the same time, the company pursues scientific and technological innovation in communications and value-added services, which greatly improves the company's operational efficiency and profitability. Through digital tools such as platform e-commerce, live e-commerce, short video, social platform and so on, the company has formed the brand operation and member operation ability of the whole scene online.

Downgrade earnings forecast and maintain "buy" rating. The company focuses on 3C digital products with mobile phones as the core, continues to make efforts in the field of fast consumer goods and new energy vehicles, and establishes strategic cooperation with many excellent brands at home and abroad. The company has a mature operating system and is actively building differentiated own brands, but due to the impact of lower-than-expected consumer electronics terminal consumption, we have lowered the growth rate of mobile phone sales revenue by 15%, 15%, 20%, 22%, 23%, 23%, 23%, and 2.3%, respectively, in 22-24 years. It is expected that the company will continue to promote sales in areas such as new energy vehicles, and we will increase the sales expense rate for 22-24 to 1.5% (the original value is 1.4%). To sum up, we downgrade our profit forecast and expect the company's 22-24 net profit to be 10.57,12.29 and 1.497 billion yuan (the previous value is 11.47,14.29 and 1.788 billion yuan, respectively), corresponding to the PE of 11-9-8, maintaining the "buy" rating.

Risk tips: mobile phone sales did not meet expectations; the epidemic repeatedly affected offline business; new brand expansion did not meet expectations.