Overview of events

The income / return net profit / deduction of non-return net profit of 23Q3 company is 1.93 billion yuan, up-13.21%, 4.20%, 74.57%, which is lower than the market expectation. We analyze that it is mainly due to the existence of consulting fees for Q3 merger and acquisition of leisure step, and according to the information of Securities Star, the 99 major online promotions of Q3 company fall short of expectations, as well as the one-time effects such as rebate provision of franchisees. Add back these factors to deduct the non-net profit is basically the same as the same period last year.

In the first three quarters of 23, the company realized income / non-return net profit / deducted non-return net profit / net operating cash flow of 7.171,270.04 million yuan, up-0.45%, 22.33%, 11.79%, 73.01%, mainly due to the increase in government subsidies, which was 24 million yuan in the first three quarters of 23, an increase of 176.22%.

Analysis and judgment:

The decline in income was mainly affected online. The revenue growth rate of 23Q3 is lower than that of Q1 and Q2 (the growth rate of Q1/Q2 revenue is-0.3% Q1/Q2 13.2%). Our analysis is mainly due to the high base of 22Q3. We analyze that due to the transfer of online consumption scenarios offline, we expect Q3 online income to decline and offline income to increase.

The increase in net interest rate is mainly contributed by government subsidies and investment income, while the decrease in non-net interest rate is affected by one-time fees. (1) the gross profit margin / return net profit rate / deduction non-net profit rate of 2023Q3 is 56.44% 16.10% debit 2.6%, which is higher than the same period last year-0.57/2.71/-6.4PCT. The decrease of gross profit margin is mainly affected by the increase in the proportion of rebate provisions of franchisees. The increase in the net return rate is mainly due to the increase in other income and net income on investment, while the decrease in the non-net interest rate is due to an increase in the expense rate of 7.5 PCT / 23Q3 sales / management / financial expense rates of 38.27%, 11.37% and 0.59%, respectively, and an increase in 5.37/2.09/-0.76PCT compared with the same period last year. According to Securities Star citing the information of the exchange meeting, we analyze that the increase in the rate of management expenses is mainly due to the one-time fees such as legal fees and consulting fees brought by the acquisition of Leisure Boys; the increase in the rate of sales expenses is mainly due to the increase in promotion and sponsorship. Other income / income increased 7.48PCT year-on-year, mainly due to receipt of government subsidies; net investment income / income increased 3.57PCT, mainly due to income from structured deposits and wealth management products purchased; fair value change income / income decreased by 0.84 PCT; asset impairment loss / income increased 1.25 PCT; income tax / income increased 0.95PCT. (2) in the first three quarters of 2023, the gross profit margin / return net profit rate of the company was 60.0% 0.04/-3.32PCT 17.8%, which decreased by 17.8% compared with the same period last year. The increase in the net return rate was mainly due to the increase in expense rate during the period. The sales / management / financial expense rate in the first three quarters of the first three quarters was 34.91%, 8.6%, 8.6%, respectively, and increased 1.03%, 1.5 and 0.5%, respectively, compared with the same period last year. Other income / income increased by 4.05PCT Net investment income / income increased by 1.16PCT; fair value change income / income increased by 1.36PCT; income tax / income increased 1.16PCT.

Inventory is flat and turnover days are increased. At the end of the 2023Q3 period, the company's inventory was 508 million yuan, down 0.01% from the same period last year, inventory turnover days was 451 days, an increase of 33 days over the same period last year; accounts receivable was 25 million yuan, down 19.97% from the same period last year, accounts receivable turnover days were 12 days, down 1 day from the same period last year; accounts payable were 199 million yuan, down 8.93% from the same period last year, and accounts payable turnover days were 197 days, unchanged from the same period last year.

Investment suggestion

According to our analysis, (1) Q3 is mainly affected by one-time fees, which does not hinder the company's medium-and long-term recommendation logic; (2) in the short term, when the company buys Leisure Boys in September, Q4 is expected to bring performance thickening; (3) there is still room for the company to open stores offline. We expect that there are only two authorized brands, and there are 500-600 single-brand stores for middle and high-end brands, and there is still room for the company to double its store opening space in the future. In the future, with the expansion of single store area, joint and several rate and repurchase rate, there is still room to improve store efficiency. (4) We expect that with the higher growth rate and share of authorized brands with high gross margin, the company's gross profit margin and net profit margin still have room to improve. Lower the previous profit forecast, reduce the 23-25 income forecast by 1.370 million yuan to 1.186 billion yuan, and reduce the 23-25 net return to mother profit 2.84 million to 2.61 million, corresponding to the reduction of 23-25 EPS 1.9563 to 1.85, 2.41 and 2.88 yuan The closing price on October 30, 2023 is 26.25 yuan, corresponding to the PE on 23-24-25, which is times that of 14-11-9, maintaining the "buy" rating.

Risk hint

M & An integration is lower than expected, store opening progress is lower than expected risk, systemic risk.