The company's 1-3Q23 revenue/net profit was 74.6/2.69 billion yuan, -41.9%/-35.8% year-on-year, respectively. Among them, the three major businesses of fashion/real estate/investment each achieved net profit of 6.5/3.3/17.1 billion yuan, +15.3%/-85.7%/+29.5% year-on-year. 3Q23 revenue/net profit was $1,59/6.3 billion, or -51.6%/-40.8% year-on-year. The company's clothing sector continues to recover well. In the future, along with channel structure optimization and operation quality improvement, it will have long-term development momentum. Maintain a “buy” rating.

The company's overall performance is affected by the cyclical nature of the real estate business. 1) Revenue and profit: The company achieved operating income of 7.458 billion yuan/ -41.85% in 1-3Q23, and net profit of 2,693 billion yuan/ -35.78%. Among them, 3Q23 achieved operating income of 1,586 million yuan/ -51.61%, and net profit of 628 million yuan/ -40.80%. 2) Costs and expenses: The company's 1-3Q23 gross margin was 53.48% /+0.78pct, of which the 3Q gross margin was 58.89% /+17.04pcts; the sales/management/R&D expense ratio was 27.12%/9.32%/1.36%, year-on-year +13.04/+3.65/+0.66pcts. The company's other income in 1-3Q23 was 35 million yuan/ +131.83%; it achieved investment income of 2,349 million yuan/ -3.62%; and asset impairment losses narrowed to 100 million yuan/ -37.47%. Overall, the company achieved a net profit margin of 36.11% /+3.42pcts in 1-3Q23, of which the 3Q23 net profit margin was 39.62% /+7.23pcts. 3) Assets: As of 3Q23, the company's book monetary fund balance was 13.429 billion yuan, +29.54% year-on-year; transactional financial assets decreased by 99.98% to 117 million yuan; operating cash flow realized a cash inflow of 3,549 billion yuan (net outflow of 3,004 billion yuan for the same period last year), with abundant cash flow. As of 3Q23, the company's accounts receivable/inventory balances were $2.43/19.119 billion, +12.96%/+18.31% year-on-year; the company held long-term equity investments/other equity investments/other non-current financial assets of $81.14/26.31/3,549 billion yuan, respectively, +11.56%/-7.79%/+10.39% year-on-year.

Clothing business: The main brand continues to grow well, and the sub-brands continue to adjust. The company's 1-3Q23 fashion sector achieved revenue of 5.102 billion yuan/ +13.20% and net profit of 651 million yuan/ +15.29%; among them, the brand clothing business achieved revenue of 4,217 million yuan/ +12.83%, and net profit of 649 million yuan/ +21.63%. By brand, the main brand YOUNGOR achieved revenue of 3,944 billion yuan/ +14.81%, and a gross profit margin of 74.69%/+1.03pcts; the remaining sub-brands achieved a total revenue of 273 million yuan/ -9.74% due to fluctuations in business and channel adjustments, with a gross margin of 66.40% /+4.14pcts. By channel, the company's 1-3Q23 self-operated outlets achieved revenue of 912 million yuan/ +7.80%, gross margin of 77.02% /+2.96pcts; shopping centers achieved revenue of 552 million yuan/ +20.61%, gross margin of 80.38% /+0.81 pct; shopping mall outlets achieved revenue of 1,336 billion yuan/ +8.78%, gross margin of 79.61% /+0.90pct; Ole outlets achieved revenue of 349 million yuan/ +54.35%, gross margin of 73.0+1.79pcts ; Franchised outlets achieved revenue of 135 million yuan/ +2.37%, gross margin of 71.59% /+0.34pct; group buying channels achieved revenue of 370 million yuan/ +5.96%, gross margin of 51.03% /- 0.48pct; e-commerce channels achieved revenue of 441 million yuan/ +8.66%, gross margin of 66.78% /-0.07pct; distribution channels achieved revenue of 80 million yuan/ -9.64%, gross margin of 67.46% /+8.72pcts, fashion, The Experience Center achieved revenue of 42 million yuan/ +934.17%, with a gross margin of 67.68% /+1.50 pcts. The company is speeding up the pace of channel restructuring and focusing on improving the quality of channel operations. As of 3Q23, the company had 1,750 self-operated stores, a net decrease of 103 from the beginning of the year. Self-operated stores achieved average sales of 1.87 million yuan, an increase of 21.70% over the previous year.

Other business: The real estate business is under pressure, and the investment business remains steady. 1) Real estate business: The company's 1-3Q23 real estate sector achieved revenue of 2,370 million yuan/ -71.54%, and net profit of 331 million yuan/ -85.65%. During the reporting period, the company's real estate business achieved pre-sale order revenue of 9.153 billion yuan/ +134.75% (pre-sale revenue is based on order size, cooperation projects are converted according to equity ratio). As of 3Q23, the company has not started any new projects. There are 6 completed and partially completed projects, with a completed area of 895,400 square meters; a total of 8 projects under construction, with an area of 1,130,400 square meters; 2 land reserves with a land area of 247,700 square meters; and a planned construction area of 489,900 square meters for future development. 2) Investment business: The company's 1-3Q23 investment business achieved net profit of 1,711 million yuan/ +29.51%. As of 3Q23, the company has recovered a total of 699 million yuan in capital to optimize the investment structure and keep the investment business running smoothly.

Risk factors: risks such as macroeconomic fluctuations; cyclical adjustment and transformation of the industry; the company's brand aging and brand adjustments and upgrades falling short of expectations; the development of new brands falling short of expectations; and fluctuations in the company's investment income due to fluctuations in the operation of invested projects.

Profit forecast, valuation and rating: Considering the cyclical decline in the company's real estate business, we lowered our 2023-2025 EPS forecast to 0.78/0.88/1.01 (the original forecast was 0.84/1.00/1.11 yuan). According to the segmented valuation method, the apparel business refers to the industry's 2023 valuation (20xPE, Jiumuwang 22 times PE, Boxiniao 13 times PE, Wind's unanimous expectations), giving the company's clothing business 15 times PE in 2023, corresponding to the target market value of 13.1 billion yuan; giving the real estate business 0.5 times PB in 2023 (referring to Vanke A, Poly Development, Xincheng Holdings, and China Merchants Shekou 2023 average of about 0.5 times PB, consistent wind expectations), corresponding to the target market value of 3.4 billion yuan; investment business maintenance The previous cost method and equity method valuations maintained the target market value of 287 to 35.2 billion yuan; after comprehensive calculation and a 10% discount for the company's group, we gave the company a target market value of 407 to 46.5 billion yuan for 2023. After conservative considerations, we finally gave the company a target price of 8.7 billion yuan for 2023.

Maintain a “buy” rating.