The company released its 2024 three-quarter report: 2024Q1-Q3 achieved revenue of 5.728 billion yuan (YoY +38.5%), net profit of 0.278 billion yuan (YoY -3.1%), net profit of 0.258 billion yuan (YoY -17.4%); Single Q3 realized revenue of 2.007 billion yuan (YoY +34.5%), net profit to mother 0.106 billion yuan (YoY +5.4%), net profit of 0.099 billion yuan (-1.5% YoY)

The company accelerated the iteration of new products, rapidly grabbed share, and maintained steady year-on-year revenue growth; profit stabilization was mainly due to external influences such as shipping. Q3 expected the company to actively raise prices & accelerate the layout of the entire industry chain, and improve profitability month-on-month.

The iteration of new products is being accelerated, growth is being driven by multiple channels, and the layout of the entire industry chain is deepening. In recent years, the company has continued to increase its efforts to launch new products and gradually expand its SKU. The new products in '23 are driven by core growth, and the revenue share of new products in '24 is expected to account for 10% + (exceeding expectations at the beginning of the year). Relying on the company's deep brand influence, new products are expected to grow rapidly. The company H2 focuses on channels such as Tmeu (opening Temu US semi-hosting in March and European semi-hosting in August) and Amazon VC in the US. The order growth rate is expected to be considerable.

In addition, the company continues to optimize the layout of the industrial chain, accelerate the procurement side's shift to Southeast Asia, hedge against future trade friction risks (Q4 Southeast Asia's share of shipments to the US is expected to reach 20%), and the transportation side is expected to expand the proportion of spontaneous last-end trips (the share of US FBM increased from 8.5% to 15.7% from January to June '24, and Europe increased from 63.9% to 67.4%), and profitability is expected to continue to improve.

Profits were recovered month-on-month, and cost control was excellent. The gross margin of the 2024Q3 company was 35.4% (-2.3 pct year on year, +1.6 pct month on month), and the net profit margin to mother was 5.3% (-1.5 pct year on year, +1.5 pct month on month). The year-on-year pressure was mainly due to high freight rates. It is expected that the company will actively raise prices and deepen upstream and downstream layout in Q3, and gradually recover profitability from month to month. In terms of expenses, the cost rate for the Q3 period was 29.4% (-0.6pct year on year), with sales/R&D/management/finance expenses ratios of 24.7%/0.9%/3.8%/-0.02%, respectively (+1.7/-0.1/+0.1/-2.3 pct year on year).

Excellent cash flow performance and stable operating capacity. The net operating cash flow of 2024Q3 was 0.561 billion yuan (+0.212 billion yuan year on year). The beautiful cash flow performance was mainly due to the increase in the use of bank acceptance notes and the increase in the scale of tax refunds. In terms of operating capacity, the number of days receivable, payable, and inventory turnover as of 2024Q3 was 9.10/28.85/81.53 days (-0.85/-0.42/+7.59 days year-on-year), respectively.

Profit forecast: The company's net profit for 2024-2026 is expected to be 0.39, 0.63, and 0.75 billion yuan respectively, corresponding to PE of 19.7X, 12.2X, and 10.2X, maintaining a “buy” rating.

Risk warning: Overseas demand recovery fell short of expectations, cross-border e-commerce competition intensified, and trade frictions intensified.