Introduction to this report:

Q3 performance fell short of expectations, Ole continued to increase at a high rate, and we expect a gradual recovery in consumption.

Key points of investment:

Investment suggestions: Q3 performance fell short of expectations, and the supermarket business was weak. The company's net profit for 2023-2025 was lowered to 0.29 (-0.10), 0.42 (-0.02), and 0.52 (-0.01) yuan, respectively. Referring to PE valuation and FCFE valuation, the target price was maintained at 18.14 yuan, maintaining the increase rating.

Summary of performance: In the first three quarters of 2023, we achieved operating income of 23.559 billion yuan/ -6.16%, net profit of 344 million yuan/year on year, net profit of 1.46%, net profit of 1.46%, and net profit of 277 million yuan/year on year to profit. Among them, Q3 in a single quarter: 2023Q3 achieved operating income of 7.227 billion yuan/ -9.63%, net profit of 16 million yuan/year on year, net profit of 0.23%, net profit of 0.23%, net profit of 0.23%, and negative net profit of 0.4 million yuan/year on year to profit.

Ole continued to soar, and the supermarket business dragged down profit performance. Supermarkets and large-scale integrated supermarket businesses accounted for 75% of total revenue in the first three quarters of 2023. The supermarket business had a significant impact on the company's business performance. Department store/shopping center/outlet, supermarket/convenience store/large integrated supermarket/large integrated supermarket/specialty store revenue for the first three quarters of 2023: +25.00%/+30.3%/+46.36%/-2.55%/+9.87%/-22.76%/+34.94%, gross margin +5.00pct/+12.19pct/+10.16pct/-0.88pct/-0.88pct/-0.38pct/+2.41pct/-11.73pct. By region, East China is the main position. There was a concentrated release of post-epidemic demand in Q3 last year. Revenue in North China/Northeast China/East China/Central China/South China/South China/Southwest China was -12.35%/+12.12%/-6.26%/-1.43%/-4.99%/-9.98%/-6.04%.

REITs revitalize existing assets. The company plans to apply for the Shanghai Another City Shopping Center project as an infrastructure project and publish a public offering of REITs. Bailian Co., Ltd. became one of the first public REITs pilot companies, benefiting the company's strategic transformation and external expansion.

Risk warning: consumer demand is weak, store expansion falls short of expectations, and industry competition is intensifying.