Main points of investment

On October 26, Aladdin released the third quarter report of 2023. In the third quarter, the gross profit margin increased by 2.4pct over the same period last year, with an increase of 1.95pct compared with the same period last year; the net profit margin increased by 24.43% compared with the same period last year, 7.13pct and 10.62pct, and profitability returned to an all-time high. We believe that with the completion of the three-year listing plan, the company's future development strategy may gradually shift from expanding the product line and increasing multi-site warehousing to the stage of improving operating capacity, and the subsequent profitability and inventory turnover are expected to continue to improve.

Financial performance: income is in line with expectations, profitability significantly repaired 2023Q1-3: income 283 million yuan, up 6.45% year-on-year; return to the mother net profit of 54.69 million yuan, down 16.56%; gross profit margin 59.57%, year-on-year increase of 0.66pct, net profit 19.34%, down 5.55pct.

2023Q3: the income is 97.33 million yuan, up 10.22% from the same period last year; the net profit from the home is 23.77 million yuan, up 55.58% from the same period last year; the gross profit margin is 59.70%, up 2.4pct from the same period last year, up 1.95pct from the previous year; and the net profit rate is 24.43% higher than the same period last year, with an increase of 10.62pct from the same period last year, and profitability returns to a historically high level.

Growth ability: the income is basically flat compared with the previous month, and it is expected that the Q3 of the overseas cash company in 2023 will be basically flat in the face of weak end demand in the industry, with double-digit growth compared with the same period last year. We believe that the revenue side of the company is in line with expectations and look forward to the gradual expansion of overseas positions such as the United States and Ireland and the improvement of the domestic investment and financing environment to promote the company's performance.

Profitability: it has been substantially repaired to a historically high level, and the company's profit side Q3 has exceeded expectations in the future, with gross profit margin Q3 increasing 2.4pct year on year and month-on-month growth 1.95pct. Under the current industry demand, it has returned to a historically high level, showing the company's strong bargaining power on upstream and downstream. The profit end is driven by the recharge of asset impairment (+ 1.98 million), which shows the low inventory risk and the long-term value of the product itself. Compared with Q2 sales and R & D expenses, Q3 has been optimized in different degrees. We believe that combined with the trend of upstream commodity prices, the company's gross profit margin may remain basically stable. Considering the current development stage of the company, we expect that there is still room for optimization on the follow-up cost side, and the net interest rate is expected to be further improved.

Cash flow of business activities: if you become a regular employee in a single quarter, it is expected to continue to optimize the cash flow of the company's Q3 operating activities. It is mainly driven by the advance payment (down 8.1 million from the previous month) and the decrease in cash for the purchase of goods and services (down 12.75 million from the previous month). With the completion of the three-year listing plan, we believe that in the future, the company will gradually shift from expanding the product line and increasing multi-site warehousing to the stage of improving operating capacity, and the follow-up inventory turnover is expected to continue to improve.

Profit forecast and valuation

Taking into account the current industry demand, we reduce the company's profit forecast for 2023-2024. We forecast that the return net profit of the company from 2023 to 2025 is 92.02 million, 107 million and 129 million respectively, and the EPS is 0.46,0.54,0.65 yuan respectively. Corresponding to the closing price of October 29, 2023, the PE of 2023 is about 45 times. With reference to comparable company valuation and industry status, maintain the "overweight" rating.

Risk hint

The volatility of the impact of depreciation of fixed assets, equity incentives and foreign exchange on apparent performance; the volatility of the profit cycle of new business; and the decline of investment and financing of innovative drugs.