Incident: Commodity City announced 24Q3 results.

① 2024Q1-Q3: Revenue of 10.613 billion, +34.25% YoY; Net Profit to Mother of 2.329 billion yuan, +0.53% YoY

② 2024Q3: Revenue 3.847 billion, +40.17% YoY; Net Profit to Mother 0.881 billion, +176.73% YoY.

The Chinagoods platform is growing steadily, and the penetration of cross-border payment services is accelerating. ① The Chinagoods platform's GMV surpassed 60.8 billion yuan in the first three quarters of 2024, a year-on-year increase of 16%. ② From January to September 2024, “YiWuPay” added more than 20 billion yuan in cross-border payment transactions, an increase of over 770% over the previous year.

Profitability has increased steadily, and main business profits have grown rapidly. ① The overall gross profit margin of 2024Q3 was 30.1%, +9.5pcts year over year. 2024Q3 sales expenses were 0.038 billion, 0.028 billion in the same period last year; management expenses were 0.12 billion, 0.115 billion in the same period last year; financial expenses were 0.026 billion, 0.037 billion in the same period last year. ② Net profit from 2024Q3 was 0.881 billion yuan, +176.7% year over year; net income from investment was 0.138 billion yuan, 0.051 billion yuan in the same period last year. If excluded, net profit to mother +178.3% year on year; net profit to mother was 22.9%, +11.3 pcts year over year. Additionally, 2024Q3's main business profit was about 0.994 billion yuan, +108% YoY.

Yiwu Pay is expected to take on the opportunities brought by the BRICS payment system. BRICS Pay, an independent cross-border trade payment system co-created by the BRICS countries, is expected to be officially launched in October this year. In this context, Yiwu Pay is expected to take on the opportunities brought by the BRICS payment system with various special payment products and functions such as local collection accounts, fund link visualization, and quick payment, to provide efficient cross-border payment solutions for Yiwu foreign trade enterprises, further enhance the efficiency of cross-border payments, and help the digital upgrading of Yiwu's foreign trade.

Investment advice: Since the beginning of the year, Yiwu's local exports have continued to be booming. Under the gradually improving platform ecology, the company's main market business has benefited from steady growth brought about by new market launches and store price increases, while businesses such as trade services, supporting services, AI, and data elements will achieve multiple monetization based on Yiwu's prosperous ecology. Benefiting from the Belt and Road initiative and the improvement of the geopolitical landscape, future business space is expected to be further opened up, leading to an upward valuation. Overall, the company's net profit to the mother is 3.13/3.57 billion yuan in 2024/2025, corresponding to 19x/17x PE, maintaining a “highly recommended” rating.

Risk warning: geopolitical risk, risk of fluctuations in foreign trade demand, risk of real estate business contraction, risk of digital platform data falling short of expectations.