The company published three quarterly reports. In the first three quarters of 2023, the company achieved revenue of 6.241 billion yuan (+4.77%), net profit of 82 million yuan (-69.44%), net profit of 802 million yuan (-69.44%), net profit of 80 million yuan (-95.73%); in the third quarter, the company achieved revenue of 1,904 million yuan (+4.86%), net profit of 0.21 million yuan (-9.96%), net profit after deduction of 46 million yuan.

Revenue continued to grow, gross margin recovered, and sales expense ratios increased. The company's revenue continued to grow in the first three quarters. We believe this is the result of the company continuing to increase channel construction, develop and nurture dealer customers, continue to sink the market, and increase the coverage of prefecture-level and county-level cities. In terms of gross margin, the company's gross margin for the first three quarters was 21.19%, down 0.42 cpt year on year. The gross margin for the third quarter was 21.35%, up 2.37 pct year on year. The increase in gross margin in the third quarter was mainly due to the year-on-year decline in the prices of raw materials such as asphalt. Judging from the cost rate, the various expense rates have remained stable, and only the sales expense ratio has fluctuated greatly. The sales expense ratio for the first three quarters was 7.05%, up 1.08pct from the previous year. We think this is mainly due to the company's further increase in channel construction and marketing.

Credit impairment drags down the company's performance. The company's credit impairment loss in the first three quarters of 2023 was 289 million yuan, the same period last year was 101 million yuan, the third quarter credit impairment loss was 134 million yuan, and the same period last year was 01 million yuan. Impairment losses are mainly due to the lengthening of the company's revenue collection period, which has led to an increase in the preparation of accrued bad debts.

The repurchase of shares shows management's confidence in the future development of the company. On the evening of October 30, the company issued an announcement stating that it plans to use no less than 500 million yuan and no more than 100 million yuan to repurchase the company's shares with a repurchase price of no more than 11 yuan/share. The share repurchase showed management's judgment on the company's value and firm confidence in future sustainable development, and strengthened investor confidence.

Investment suggestions: The company's revenue for 2023-2025 is estimated to be 81.88, 95.52 and 11.355 billion yuan respectively, and net profit of 0.64, 4.42 and 679 million yuan respectively, corresponding to PE of 123.68, 18.01 and 11.72 times, respectively. Maintain a “buy” rating.

Risk warning: Downstream demand is weakening, industry competition is intensifying, and prices of raw materials such as asphalt are rising.