Core ideas:

The company disclosed that its revenue from January to September was 1.539 billion yuan, an increase of 3.5% over the same period last year, of which revenue in the third quarter was 503 million yuan, an increase of 3.4% over the same period last year. The net profit from January to September was 227 million yuan, an increase of 40.7% over the same period last year, and its net profit in the third quarter was 49.62 million yuan, an increase of 19.7% over the same period last year. The company expects 17-year net profit range of 212 million yuan to 266 million yuan, an increase of 10% to 45% compared with the same period last year.

The increase in the proportion of e-commerce sales leads to a small increase in revenue

We believe that the growth of the company's revenue from January to September is mainly due to the growth and share of e-commerce sales. In the first half of 2016, the company accounted for about 30% of online sales, up from 25% in 2016. The company has adjusted its offline channels since mid-2016, with the number of direct stores falling from nearly 2000 in mid-16 to about 1300 in mid-17. Although the number of stores fell by more than 30%, the proportion of direct revenue fell by only single digits in the first half of the year, mainly due to the improvement in the average efficiency of direct stores. We believe that most of the adjustment of the company's direct stores has been completed, and it is unlikely that the number of direct stores will continue to decline significantly in the future.

The increase in the rate of management expenses compared with the same period last year narrows the growth rate of net profit.

The company's third-quarter net profit rose 19.7% from a year earlier, narrowing from 40.7% in the first half of the year. The increase in the company's net profit is mainly due to the decline in the rate of sales expenses brought about by the decrease in the number of offline stores with a small increase in revenue. But in the third quarter, the company's management expenses rose 3.1% from a year earlier, up from 1.7% in the first half of the year.

It is expected that the results in 17-19 will be 0.67 yuan per share, 0.77 yuan per share and 0.88 yuan per share, respectively. The current stock price is 26.0x and 22.5x respectively for 17Unip 18 years. Maintain the buy rating.

Risk hint

The risk that the decline in economic growth will lead to a slowdown in the overall growth rate of the underwear market; the risk of failing to adapt to changes in consumer demand and leading to a decline in market share