Q3 revenue continued to grow at a high rate, optimistic about the subsequent improvement of profitability, maintaining the "Buy" rating. The company achieved operating income of 282 million yuan (year-on-year +34.96%) in Q3 of 2023, and realized net profit of-14.1049 million yuan (year-on-year profit to loss). The performance growth may be due to the rapid growth of the company's brand marketing and e-commerce agency operations. In the first three quarters of 2023, the Company realized operating income of RMB 959 million yuan (year-on-year +17.64%) and net profit attributable to parent company of RMB 14.0623 million yuan (year-on-year--46.53%). The decrease of net profit attributable to parent company may be due to the investment in AI R & D and new business investment of the Company. Taking into account the impact of the company's new business expansion and AI R & D investment, we lowered our profit forecast for 2023-2025, and estimated that the company's net profit from 2023-2025 will be RMB 76/1.21/152 million respectively.(The value before 2023-2025 is 1.51/1.94/2.47 million yuan), corresponding EPS is 0.38/0.61/0.76 yuan respectively, and the current share price corresponds to PE 52.5/33.1/26.3 times respectively. We are optimistic about the long-term growth space under the AIGC empowerment of the company and maintain the "buy" rating.

New business investment, AIGC R & D caused pressure on gross profit margin, cost reduction and efficiency increase provided profit elasticity of 42.81%(-9.88 pct) in Q3 of 2023, or higher cost investment due to the increase in operating costs brought by AI consumption model R & D and the increase in personnel expenses brought by the establishment of a team for the company's offshore business. On the expense side, the company's sales expense ratio in Q3 of 2023 is 19.94%(year-on-year--3.24pct), and the management expense ratio in Q3 of 2023 is 15.77%(year-on-year--0.52pct). The company's cost reduction and efficiency measures may continue to provide flexibility for profits. We believe that the comprehensive transformation and upgrading of the company's main station, the steady progress of cross-border e-commerce business, and the continuous breakthrough of AIGC application are expected to promote the continuous growth of the company's performance.

AIGC enabling business was at the right time, and the Double Eleven promoted Q4 performance growth. The company continued to apply AIGC to improve the conversion rate of consumer purchase decisions, and successively launched AI purchasing guide, AI selling point extraction and other tools. According to the company, after applying AIGC, the number of e-commerce clicks of users who have browsed AIGC selling points has increased by 21%. In the pre-sale of Double Eleven, the company used AIGC to generate a large number of good price explosions, created a number of explosive sales records through direct preferential treatment, and greatly reduced the screening cost of consumers. In addition, the company continues to explore landing scenarios based on large models of its own consumption content, or will make efforts in the direction of automatic generation of consumption text content such as long and short texts. We believe that with the promotion of the Double Eleven, the company's AIGC technology is expected to continuously improve the interactive and intelligent experience of the platform and further open up commercial space.

Risk tips: the risk of e-commerce policy change, new business development is not as expected.