Event: The company released its report for the third quarter of 2023. The first three quarters of 2023 achieved operating income of 888 million yuan, +1.66% year-on-year, net profit of 89 million yuan, +100.51%, net profit after deduction of 83 million yuan, +157.29%; in a single quarter, 2023Q3 achieved operating income of 345 million yuan, +29.18% year-on-year, net profit of 39 million yuan, +274.91% year-on-year, and net profit of 39 million yuan, +466.7% year-on-year.

The removal of warehouses from Europe and the US is in progress, and profitability has increased dramatically. 2023Q3 achieved revenue of 345 million yuan, +29.18% year-on-year, mainly due to revenue growth for household products and auto parts products; net profit of 39 million yuan, +274.91%, net profit after deduction of 39 million yuan, +467.46% year-on-year, and a sharp increase in single-quarter performance, mainly due to a decrease in shipping costs, major raw materials over the same period, and internal cost reduction and efficiency. Downstream products continue to be removed from stocks. According to data from the US Department of Commerce, the inventory sales ratio of furniture and home furnishings wholesalers in the US from May to August 2023 (non-seasonally adjusted) was 1.7/1.68/1.79/1.54, respectively, compared to -7.6%/-8.2%/-13.5%/-16.3%, respectively. Inventory continued to be digested. The company's 23Q3 gross sales margin increased 4.43pct to 28.13% month-on-month, and net sales margin increased by 1.87pct to 11.18%. It is expected to be mainly due to the scale effect of some products being shipped from low-cost Malaysian factories, declining raw materials, exchange rates, and increased revenue scale.

Investment suggestions: We expect the company's net profit from 2023-2025 to be 1.01/1.30/158 million yuan respectively, corresponding to PE 31/24/20 times, respectively, covering the first time, and giving it an increase in holdings rating.

Risk warning: Downstream demand is less than expected, raw materials and shipping costs have risen more than expected, etc.