The company's revenue performance in the third quarter was under significant pressure

The company 24Q1-3 achieved operating income of 3.572 billion yuan, -21.41% YoY, net profit attributable to mother of 0.141 billion yuan, year-on-year net profit of -57.85%, net profit of 0.122 billion yuan, -63.79% year-on-year, of which Q3 achieved revenue of 1.238 billion yuan in a single quarter, -24.30% YoY, and realized net profit attributable to mother 0.058 billion yuan, YoY -65.72%, net profit not attributable to mother 0.054 Billions of yuan, -68.74% year over year. The real estate industry was still at its bottom in the third quarter, demand for architectural ceramics was limited, and the company's revenue and profits all faced significant downward pressure.

Raw material prices have risen, and profitability is under significant pressure

The 24Q3 company's gross margin for the single quarter was 29.01%, -3.55pct year on year, and the cumulative gross margin for the first three quarters was 27.6%, -2.0pct year on year. We judge that the company's gross margin declined significantly in the third quarter. Apart from price reduction promotions due to insufficient demand, the rise in raw material costs also had an impact on the company's profitability. The average price of liquefied natural gas across the country in the 24Q3 single quarter was +19.9%, +13.9% month-on-month, and the average price of corrugated paper was -5.7% year-on-year, and -1.4% month-on-month. Since the beginning of October, the average price of natural gas and corrugated paper has declined compared to the average price of 23Q4. If the cost of raw materials continues to decline, it is expected to improve the company's profitability.

Expenses were not effectively diluted, and cash flow continued to improve

The 24Q1-3 company's expenses rate for the period was 21.21%, +2.4 pct. Among them, sales, management, R&D, and finance expenses were -0.5, +2.3, +0.3, and +0.2 pct year over year, respectively. Apart from management expenses, the absolute values of the remaining three expenses of the 24Q1-3 company all declined, but revenue declined year-on-year, resulting in expenses, etc. not being effectively diluted. In total, 24Q1-3 accrued asset and credit impairment losses of 0.01 billion yuan, a year-on-year reduction of 0.012 billion yuan. Accumulated credit impairment losses from year 21 to 24Q3 accounted for 105.9% of accounts receivable at the end of 24Q3. We determine that impairment accrual is sufficient. As the share of engineering channel revenue declines, subsequent impairment exposure is expected to gradually decrease. Under the combined influence, 24Q1-3 net margin was 3.99%, -4.25pct year over year. In terms of cash flow, the net CFO of 24Q1-3 was 0.515 billion yuan, with a year-on-year increase of 0.039 billion yuan. The revenue ratio was +7.92 pct to 111.7% year over year, and the payout ratio was -3.01 pct to 99.46% year over year.

Continue to be optimistic about medium- to long-term growth and maintain an “gain” rating

We judge that the current company's impairment calculation may be sufficient. Considering that weak demand for ceramic tiles has put some pressure on the company's performance growth since 24, we lowered our 24-26 net profit forecast to 0.2, 0.24, and 0.32 billion yuan (previous values were 0.26, 0.34, 0.43 billion yuan). In the medium to long term, we believe that Mona Lisa, as the leading ceramic tile company, if demand in the future industry picks up, there is still plenty of room for improvement in the company's market share and maintain the “gain” rating.

Risk warning: Price reductions for fiercely competitive products exceeded expectations, downstream real estate repayments fell short of expectations, raw materials rose more than expected, and C-side expansion fell short of expectations.