The company released its 2024 three-quarter report on the evening of October 14. In the third quarter of 2024, the company achieved revenue of 3.847 billion yuan, an increase of 40.17% year on year; net profit to mother was 0.881 billion yuan, up 176.73% year on year, after deducting non-net profit of 0.864 billion yuan, an increase of 177.21% year on year. Diluted EPS of 0.16 yuan, return on net assets of 4.45%.

Net operating cash flow for the first three quarters was $0.453 billion, up 21.53% year over year.

Brief review and investment advice.

1. 3Q2024's revenue was 3.847 billion yuan, up 40.17% year over year. 1-3Q2024 achieved revenue of 10.613 billion yuan, a year-on-year increase of 34.25%, of which 3Q2024 revenue was 3.847 billion yuan, an increase of 40.17% year-on-year.

1-3Q comprehensive gross margin increased 4.90pct yoy to 32%, of which 3Q2024 gross margin increased 9.54pct yoy to 30.10%.

2. The cost rate during 3Q2024 was 4.94%, a year-on-year decrease of 1.85pct. The cost rate decreased by 2.21pct to 5.33% year-on-year during 1-3Q2024, and 1.85pct to 4.94% year-on-year during the 3Q2024 period. Among them, the 3Q24 sales expense ratio decreased by 0.06 pct to 0.98%; the management expense ratio decreased by 1.09 pct to 3.11% year over year; the financial expense ratio decreased by 0.67 pct to 0.68% year over year; and the R&D expense ratio decreased by 0.04 pct to 0.17% year over year.

3. Net profit of 3Q2024 was 0.881 billion yuan, up 176.73% year on year, and main profit increased by more than 108%.

1-3Q2024's operating profit was 2.959 billion yuan, up 8.8% year on year, including 3Q operating profit of 1.064 billion yuan, up 172.7% year on year. 3Q2024 fair value change profit and loss of 3.25 million yuan, net investment income 0.138 billion yuan; effective tax rate reduced by 1.65pct to 17.33%. In the end, 1-3Q2024 net profit to mother was 2.329 billion yuan, up 0.53% year on year, of which 3Q2024 net profit was 0.881 billion yuan, up 176.73% year on year; 1-3Q2024 deducted non-net profit of 2.283 billion yuan, up 6.12% year on year, of which 3Q2024 deducted non-net profit of 0.864 billion yuan, up 177.21% year on year. The company disclosed that the main business profit of 3Q24 was about 0.994 billion, up more than 108% from 0.477 billion in 3Q23.

4. The CG platform and Yiwu Pay have both increased. ① The Chinagoods platform's GMV exceeded 60.8 billion yuan in the first three quarters, a year-on-year increase of more than 16%. ② In the first three quarters, the transaction volume of the “Yiwu Pay” cross-border payment business exceeded 20 billion yuan, an increase of more than 770% over the previous year.

Maintain judgment on the company. In 2019, the company proposed the strategy of “using the market as the main business, using numbers as the link, and using the platform as support to build a comprehensive international trade service provider”. Dynamic rent adjustments consolidated the growth logic, and the new business gradually contributed to profits and had plenty of room for monetization. We believe that looking ahead to the next three years, the market business will enter a new cycle of expansion. The profit growth of new businesses under ecosystem resonance is expected to be released nonlinearly, and may further open up valuation space upward.

Update profit forecasts and valuations. Net profit for 2024-2026 is expected to be 2.981 billion yuan, 3.199 billion yuan, and 4.48 billion yuan, respectively, up 11.4%, 7.3%, and 40.1% year-on-year. We value offline and online businesses using PE and PGMV methods, respectively. Excluding the net profit of the Chinagoods platform, the offline business was given 16-20 times PE in 2024, corresponding to a reasonable market value range of 34 billion yuan to 42.4 billion yuan, and the online business was given 80 billion yuan to 0.40-0.45 times PGMV in 2024, corresponding to a market capitalization of 32-36 billion yuan. The overall reasonable market value range for the company was 66-78.4 billion yuan, and the reasonable stock price range was 12.03-14.30 yuan per share. Maintain an investment rating of “superior to the market”.

Risk warning: Market expansion falls short of expectations, capital expenditure pressure, new business development falls short of expectations, insufficient talent reserves, and uncertainty in the foreign trade environment.