Core views:

Incident: Commodity City released its 2024 Q3 report. (1) 24Q1-3 achieved revenue of 10.61 billion yuan, a year-on-year increase of 34.3%; realized net profit to mother of 2.33 billion yuan, an increase of 0.5% year-on-year.

In 24Q3, the company achieved revenue of 3.85 billion yuan, a year-on-year increase of 40.2%. Net profit to mother was 0.88 billion yuan, up 176.7% year on year, and net profit margin to mother was 22.9%, +11.30pp year on year. Net profit after deducting non-return to mother was 0.86 billion yuan, a year-on-year increase of 177.2%. Gross profit margin of 30.1%, +9.54pp.

(2) In 24Q3, the company's sales expense ratio was 1.0%, -0.06pp; management expense ratio was 3.1%, y-1.09pp; R&D expense ratio was 0.2%, -0.04pp; financial expenses ratio was 0.7%, y-0.67pp.

Comment: According to the company's financial report, 24Q3's main business profit was about 0.994 billion yuan, and the main business profit for the third quarter of 2023 was about 0.477 billion yuan, an increase of more than 108% over the previous year, mainly due to the growth contributions of the market operation business and chinagoods business. (1) What is the main benefit of the company's market operation and business growth? The 3rd floor east of District 2 will increase rent this year,? The rent will increase when the existing leasable area expires. At the same time, the company's global digital trade center is progressing steadily, which is expected to drive the growth of market operating business revenue in the future. (2) The Chinagoods platform's GMV exceeded 60.8 billion yuan, a year-on-year increase of more than 16%. During the 24Q1-3 period, “Yiwu Pay” added more than 20 billion yuan in cross-border payment transactions, an increase of over 770% over the previous year. The company continues to improve the CG platform business, improve supply chain services, and boost profitability.

Profit forecasting and investment advice. We expect the company to achieve overall operating income of 14.61/16.97/19.68 billion yuan in 2024-2026, an increase of 29.3%/16.1%/16.0%; net profit to mother will be 2.99/3.34/4.14 billion yuan, respectively, with a year-on-year increase of 11.7%/11.8%/23.8% in 2024-2026. Referring to comparable company valuations, the company was given a 2024 22x PE valuation, with a reasonable value of 11.99 yuan/share, giving it a “buy” rating.

Risk warning. The risk of macroeconomic fluctuations; the risk of new business development falling short of expectations; the risk of insufficient talent reserves; the company may face the risk of insufficient reserves of professionals and complex talents