Incident: The company released its 2024 quarterly report. In 24Q1, the company achieved operating income of 526 million yuan, an increase of 32.77% over the previous year; realized net profit of 108 million yuan, an increase of 40.43% over the previous year; and realized net profit without return to mother of 106 million yuan, an increase of 40.14% over the previous year.

High growth continued in the first quarter, and the market share of the core market increased further. The 24Q1 company's revenue was 530 million yuan, up 32.8% year on year. The previous performance forecast achieved revenue of about 520 million yuan to 530 million yuan, which is in line with the performance forecast. In the first quarter, the company continued to implement the business policy of “maintaining strategic strength, gathering endogenous motivation, stimulating market vitality, and promoting the endurance of Qinghai-Tibet”. The market share in the province was further increased, and its competitive position was stabilized. Contract liabilities at the end of the first quarter increased by 16 million yuan year-on-year and decreased by 190 million yuan month-on-month, which was basically stable.

The expense ratio was generally stable during the period, and the net interest rate increased slightly. The company's gross margin decreased by 0.6 pct year on year in 24Q1, which is expected mainly due to changes in product structure. The sales expense ratio, management expense ratio, and financial expense ratio changed by +0.34/ -0.36/ -1.03pct, respectively. The increase in sales expenses was mainly an increase in marketing and promotion expenses, and the change in financial expenses was mainly affected by changes in the US dollar exchange rate. Under the combined influence, the net profit margin for 24Q1 increased 1.12pct year-on-year to 20.59%.

Investment advice: We believe that the company's improvement momentum was good in 23, and the core products are expected to grow steadily in 24. The company's revenue is expected to be 14.4/16.8/19.01 billion yuan in 24-26, respectively, with a year-on-year growth rate of 18.6%/16.9%/14.0%. Net profit attributable to mother is estimated to be 1.2/2.0/260 million yuan, with year-on-year growth rates of 37.2%/59.2%/30.8%, maintaining the “increase in holdings” rating.

Risk warning: Product structure upgrades fall short of expected risks, competition heightens risks, and expansion outside the province falls short of expected risks