Incident: The company released a report on the Double Eleven event. During the event, the company's more than 400 stores participated in the event, attracting 658,000 home improvement consumers to make transactions. Sales increased by 42.8% year on year, exceeding the 20% growth target announced on the launch day.

The performance of the Double Eleven event was impressive, and digital intelligent marketing empowered merchants to operate. First-tier cities grew rapidly, and second-tier and third-tier cities performed better. Sales in first-tier cities such as Beijing, Guangzhou, and Wuhan increased by more than 25% year over year, while sales in second-tier and third-tier cities such as Changchun, Taiyuan, and Shijiazhuang increased nearly 50% year over year. Meanwhile, sales in categories such as smart home appliances, custom furniture, system doors and windows, and upholstered furniture increased by more than 35% year-on-year. Among them, sales of smart home appliances increased by more than 45% year on year. The company was empowered through a live streaming IP, and Lao Wang came & CEO to achieve 7.88 million live streaming views, 43,000 orders, and an increase of 115,000 fans.

Steadily develop the main home furnishing store business, and franchise chains promote the decline in channels. The company established a closed loop of digital marketing: 1) Joint brand factories to carry out national superbrand day activities, and actively organized various marketing IP activities, all with excellent implementation performance 2) Increased online Internet layout, promoted strategic cooperation on public domain traffic platforms, and improved overall efficiency through emerging methods such as live broadcasts and short videos. At the same time, the company implemented an asset-light franchise model, focusing on southwest China and central China, accelerating channel decline, and a steady increase in the number of cooperative brands and stores. In the first half of the year, the company completed GMV of 48.13 billion yuan, an increase of 2.3% over the previous year.

Digital transformation has created an S2B2C industrial service platform, and the results of continuous layout have been highlighted. The company built the “Dongwo” digital service platform, realized the digital upgrading of enterprises, and opened it up to the outside world to empower industry development. By the end of the third quarter, “Dongwo” had launched 703 stores and 79,000 merchants, including 394 external stores and 40,000 external merchants; the cumulative number of registered users reached 19.376 million, and monthly active users exceeded 3 million.

The “cave” achieved an overall GMV of 62.19 billion yuan, an increase of 304% over the previous year. Based on the “cave”, the company built a “ground network” for offline delivery of “logistics distribution+home service”, and realized the full life cycle layout of consumers to provide consumers with services such as smart homes, home decoration design, and smart home decoration. The layout of all business segments has achieved impressive results.

Investment suggestions: The company is the leader in the domestic pan-home furnishing industry. Offline home furnishing stores are expanding steadily, digital transformation is developing efficiently, and there is broad room for future growth. The company is expected to achieve basic earnings of 0.27/ 0.31/0.34 yuan per share in 2023/24/25. The corresponding PE is 13X/11X/10X, maintaining the “recommended” rating.