Event: The company released its 2023 three-quarter report. ① In the first three quarters of 2023, the company achieved revenue of 9.744 billion yuan (+3.33% year-on-year), net profit of 1,151 billion yuan (-24.99% year-on-year), net profit of 1,184 billion yuan (-27.26% year-on-year) after deducting non-return net profit of 1,184 billion yuan (-27.26% year-on-year). ② In 23Q3, the company achieved revenue of 3.34 billion yuan (+6.15% year-on-year), net profit of 284 million yuan (-41.30% year-on-year), and net profit of 308 million yuan (-42.56% year-on-year) after deducting non-return net profit of 308 million yuan (-42.56% yoy).

Take root in the store business, actively explore digital transformation, and build an integrated platform for the pan-home furnishing industry. The company uses “Easy Home” as the brand to carry out chain store management business, and has carried out chain expansion through two models of direct management and franchise. At the same time, with the “Dongwo” digital platform as the core, the company is actively expanding into the home furnishing industry chain. Currently, the business covers design, decoration, smart homes, logistics and distribution, and home delivery services, etc., creating an integrated platform for the pan-home furnishing industry. As of June 30, 2023, the company has operated a total of 418 home furnishing stores, 3 shopping centers, 6 modern department stores and 162 supermarkets of various types in 29 provinces, regions and cities across the country.

Profit forecast: We adjusted the company's profit forecast. We expect the company to achieve revenue of 136.02 billion yuan, 14.962 billion yuan, +4.8%, and 10.0% year-on-year; net profit of 15.80 billion yuan, 1,782 billion yuan, -4.2%, +12.8%, corresponding to the closing price of November 10, 2023, PE 13.8 and 12.2 times.

Maintain an “increase in holdings” rating.

Risk warning: industry competition intensifies risk, franchise business expansion falls short of expected risk, real estate completion falls short of anticipated risk