Gross margin has rebounded, and the impact of non-core factors has weakened. In the first three quarters of 23 years, the company achieved operating income of 9.07 billion yuan, an increase of 2.1% over the previous year; the gross profit margin of its main business was 10.5%, up 1.8 pct from the full year of 2022; and net profit from net profit of 68 million yuan was 68 million yuan, a sharp decrease of 151 million yuan over the previous year. The impact on one-time non-core business includes several factors such as the return of government subsidies, amortization of employee stock holdings, and commercial leasing in Kunming. The third quarter achieved a net loss of 19.12 million yuan per quarter, a decrease of about 81.45 million yuan compared to the second quarter.

Core business operating indicators are growing steadily. In the first three quarters, the company achieved a cumulative total housing transaction value (GTV) of about 227 billion yuan, an increase of 12.7% over the previous year; the cumulative transaction volume was 49,000, an increase of 16.5% over the previous year, and the transaction commission revenue increased 15.5% year over year. In terms of the shared housing business, the number of housing units under management reached 268,000, an increase of 14,000 compared to the beginning of the year. The total number of general rental orders was 158,000, an increase of 12.4% over the previous year, and a 22.8% increase in general rental commission revenue over the same period last year.

Against the backdrop of pressure on real estate sales and a dualist competitive pattern in the decentralized rental market, the company's long-term rental apartment business became a ballast stone for steady performance growth.

Losing fat and building muscle increases profitability, and the market share of first-tier cities has increased. In the first three quarters, the total number of operating stores was about 2,887, including 2,325 direct-run stores, 562 franchise stores, and a total of more than 30,000 agents. The company continued to focus on core cities. After closing some non-core cities and inefficient franchise businesses, the company effectively enhanced overall profitability. The market share of core cities maintained a steady upward trend. In September, Hangzhou's share increased markedly, maintaining a leading position of more than 30%. The market share of the Beijing region increased 0.2 pct year on year in the first three quarters, and the market share of Shanghai increased 0.5 pct year on year.

The digital platform has shown results and improved operational efficiency. As of the first half of the year, the company's APP MAU reached 3.39 million, up 7% year on year, PC MAU reached 5.47 million, up 21% year on year, and Mini Program MAU reached 2.2 million, up 8% year on year. The share of customer transactions on the official website of I Love My Family in Beijing reached 62.1%, an increase of 5.7pct over the previous year; the share of customer entry on the official website reached 54.9%, an increase of 5.8pct over the previous year. With the support of digital infrastructure, the company has achieved collaborative sharing and optimal matching of core business elements such as housing, customers, people, and stores in markets such as second-hand housing sales, new housing sales, and rental services, improving business operation efficiency and system resilience to risks.

Investment advice: We predict that the company's EPS for 2023-2025 will be 0.02 yuan/0.05 yuan/0.12 yuan/share, and the corresponding PE will be 138.9/50.1/20.1 times, respectively, covering the first time, and giving it a “buy” rating.

Risk warning: Second-hand housing listings continue to rise, sales continue to decline, asset disposal falls short of expectations, housing prices fall beyond expectations, etc.