The company announced the third quarterly report of 2023: revenue of 1.846 billion yuan / yoy+7.37% and net profit of 414 million yuan / yoy+10.17% in the first three quarters of 2023. From a quarterly point of view, 23Q1/Q2/Q3 revenue and net profit are + 2.27%, 26.50%, 3.28% and 13.54%, respectively, compared with the same period last year. Under the weakening retail environment and high base, Q3 revenue growth turned negative year-on-year, and the decline in net profit exceeded income mainly due to the increase in expense rate and asset loss.

Sub-brand: the opening of stores promotes the continuous high growth of RA, while the growth rate of Q3 of other brands slows down. In the first three quarters of 23, DA/DZ/DM/RA revenue was + 5%, 12%, 10%, 38%, and 54%, 39%, 6%, respectively. Year-on-year revenue from Q3 alone is-9%, 8%, 18%, 39%, 39%, respectively. Due to a small base, other brands maintain a high growth rate due to the weak recovery of the consumer environment and the high base in the same period last year, as well as the active closure of inefficient stores in the clearance cycle, revenue growth has slowed down:

DM, DA revenue fell compared with the same period last year, mainly due to store adjustment, as of 23Q3 stores year-on-year-17Andrew 57, yoy-44%/-9%;DZ benefited from store efficiency recovery, Q3 revenue maintained positive growth, as of 23Q3 stores year-on-year-6 / yoy-1%;RA year-on-year high growth mainly driven by store expansion, as of 23Q3 stores year-on-year + 5 / yoy+33%.

Sub-channels: shop efficiency continued to repair in the first three quarters, online channels maintained good growth, and store adjustment led to negative offline growth in Q3. 1) online and offline: in the first three quarters of 23, the online / offline revenue in the first three quarters of the year was + 32%, accounting for 15%, 85%, and + 32%, respectively, in Q3 compared with the same period last year. Online e-commerce continued to grow, customs stores led to a decline in Q3 offline revenue. 2) offline direct distribution: in the first three quarters of 23, the direct sales / distribution revenue was + 9%, 1%, 51%, 49%, respectively, and Q3 was-9%, 6%, 6%, 6%, respectively, respectively. 3) offline endogenous extension: in the first three quarters of 23, the year-on-year efficiency of single stores is about + 10%, and the number of stores is-6% compared with the same period last year. Since the beginning of the year, the company has taken the initiative to adjust the store structure, close inefficient stores and improve the profitability of individual stores. As of 23Q3, the total number of stores is still in net clearance, with a total of 1086 stores (year-on-year-75 / yoy-6%), of which direct marketing / distribution is 292max / yoy-13%/-4% respectively (compared with the same period last year).

Gross profit margin is relatively stable, Q3 net profit rate declined, cash flow performance is better. 1) Gross profit margin: in the first three quarters of 23, the gross profit margin was + 0.15pct to 74.81% compared with the same period last year, which was relatively stable compared with the same period last year. Quarterly 23Q1/Q2/Q3 gross profit margin is flat /-0.22/+0.49pct respectively compared with the same period last year. 2) period expense rate: during the first three quarters of 23, the expense rate was year-on-year-1.64pct to 45.83%, in which the sales / management / R & D / financial expense rate was respectively year-on-year-1.31/+0.06/+0.12/-0.51pct. The expense rate for the single Q3 period is from + 1.05pct to 46.94% compared with the same period last year, mainly due to the management expense rate compared with the same period last year + 0.82pct. 3) homing net interest rate: combined with the change of gross profit margin and expense rate, the superimposed fair value change increased, the asset impairment loss increased, and the investment income decreased compared with the same period last year. In the first three quarters of 23, the homing net interest rate increased from + 0.57pct to 22.41%, and the single Q3 net interest rate increased from-2.12pct to 17.86%. 4) inventory: 23Q3 final inventory 478 million yuan / yoy+22.34%, inventory size has increased, inventory turnover days compared with the same period last year + 27 days to 248days. 5) Cash flow: 23 net cash flow of operating activities in the first three quarters 496 million / yoy+36.03%;23Q3 currency fund 2.26 billion yuan / yoy+10.36%, cash is abundant.

Profit forecast and investment rating: the company is deeply engaged in the field of middle and high-end women's wear, multi-brand gradient development. In the first half of 23 years, the passenger flow repair was liberalized from the epidemic situation, and the running water gradually improved, and the profit growth rate under the operating leverage was higher, but they have not yet exceeded the 21-year level. Since 23Q3, due to the high base and fluctuating flow, we believe that the company is still in the process of repair and will show strong profit repair flexibility in the future. On 2023-9-27, the company issued an incentive plan (including stock options and restricted stock incentive plan). The performance evaluation was as follows: ① 23 year revenue / net profit increased by 10% and 20% respectively. Compared with 22 years, the sum of revenue in 23-24 years / net profit in 23-24 years increased by 125% / 155% respectively. Based on the first phase 23 exercise performance evaluation, the growth rate of revenue / net profit in ② is 5% / 13% respectively over the same period last year. The incentive targets include directors, executives and core technical personnel for the first time, which is expected to mobilize the enthusiasm of core talents. We downgrade the 23-25 homing net profit forecast of 5.8x6. 9x7.8 to $545,000,000, corresponding to PE of 13,000,000, and maintain the "buy" rating.

Risk tips: weak end consumption, new brand development is not as expected, etc.