Brief performance review

On October 23, the company released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 5.73 billion yuan, +38.5% year over year; net profit to mother was 0.28 billion yuan, -3.1% year over year. Among them, the company's revenue for the third quarter was +34.5% to 2.01 billion yuan, net profit to mother was +5.4% to 0.11 billion yuan, and net profit not attributable to mother was -1.5% to 0.1 billion yuan YoY.

Management analysis

Smooth new product development+accelerated platform expansion, Q3 revenue continued excellent performance: Benefiting from the company's continuous launch of new products and the smooth expansion of new platforms such as Temu, Target, and Tik Tok Shop, the company continued to perform well in 24Q3 revenue. By product, it is expected that the home and furniture series will continue to grow rapidly, and with shipping disturbances mitigated to a certain extent, the growth of sports and outdoor products may recover to some extent.

Q3 gross margin rebounded month-on-month, and marginal profitability improved: the company's 24Q1-3 gross margin/net margin increased by -1.8pct/-2.1pct to 35.1%/4.9%, respectively, of which 24Q3 gross margin/net margin was -2.3 pct/ -1.5pct to 35.4%/5.3% year over year, mainly because shipping costs were still high compared to the same period last year. On a month-on-month basis, 24Q3 gross margin/net margin increased 1.6 pct/1.5 pct, respectively. In terms of cost ratio, 24Q3 sales/management/R&D expense rates were +1.7/+0.1/-0.1pct to 24.7%/3.8%/0.9%, respectively.

The company's comprehensive capabilities are leading, and the continuous expansion of category+platform+channel supports the sustainability of growth:

The company has built strong advantages in brand strength, product procurement, overseas warehousing and logistics, marketing and operation, etc., leading its peers in comprehensive capabilities and laying the foundation for continued growth. The company's follow-up strategy is clear and effective. While deepening the existing superior categories, it is increasing the expansion of new categories and supporting the smooth expansion of categories through product serialization. On the platform side, while the company is deeply involved in the Amazon platform, relying on strong supply chain and operational capabilities, the expansion of the new platform is accelerating, and future expansion space for platforms such as Temu, OTTO, and Shein can be expected. Furthermore, the company is gradually expanding its offline channels, which is expected to further open up room for long-term growth.

Profit Forecasts, Valuations, and Ratings

We expect the company's EPS to be 0.95/1.27/1.61 yuan in 24-26, and the current stock price corresponding to PE is 20/15/12 times, respectively, maintaining a “buy” rating.

Risk warning

The development of categories and channels fell short of expectations; exchange rates fluctuated greatly; and shipping costs rose sharply.