The company released three quarterly reports: Q3 revenue of 0.184 billion yuan (yoy +3.35%, qoq +28.13%), net profit of 0.026 billion yuan (yoy -49.07%, qoq +958.27%), slightly lower than our Q3 forecast range (0.031-0.036 billion yuan). Q1-Q3 revenue was 0.505 billion yuan (yoy +16.59%), net profit due to mother was 67.2162 million yuan (yoy -44.23%), after deducting non-net profit of 54.2323 million yuan (yoy -52.04%).

On the revenue side, both Q3 and Q1-Q3 continued to grow. The profit side is temporarily under pressure due to the addition of new high-speed rail and outdoor large screen locations, which are expected to be released in the future, maintaining the “buy” rating.

Q3 The revenue side maintained year-on-year growth, but gross margin was still under pressure

24Q3 revenue increased slightly year-on-year, and grew faster month-on-month, mainly because summer vacation was the peak season for high-speed rail transportation, and business grew accordingly; Q3 net profit fell 49%, mainly due to a year-on-year decrease of about 9 pcts in gross margin, which is in line with the 24-year trend. The 24Q1-Q3 revenue side also increased 16.59%, mainly due to: 1) the newly developed outdoor 3D large screen business contributed to revenue; 2) the high-speed rail media business revenue increased due to the increase in locations. However, the overall gross profit margin was 33.53%, down 10.61 pcts, mainly due to the addition of new positions in the high-speed rail media business, where the cost side came first, and the revenue side lagged behind due to reasons such as the time required for investment promotion. Sales/management/R&D/finance expense ratios were 17.63%/2.79%/1.68%/-2.61%, respectively, -0.53/-0.6/-0.1/6.7pct. Sales/management/R&D expense ratios all declined; deposit interest income decreased due to an increase in interest expenses on leasing liabilities and a decrease in deposit interest rates, and the financial expense ratio changed greatly.

The high-speed rail media network is rich in resources and can meet the three-dimensional marketing needs of customers. By the end of 24H1, it had signed media resource usage agreements with all 18 domestic railway administration groups, signed 564 railway passenger terminals, and operated 5,310 digital media screens, including the “eight vertical and eight horizontal” high-speed rail aorta, covering economically developed urban agglomerations and sinking to third- and fourth-tier cities and counties. While consolidating the advantages of high-speed rail media resource coverage, we will further enhance the abundance and quality of the high-speed rail media resource matrix to meet the three-dimensional marketing needs of brand customers across the country.

Outdoor naked eye 3D screens built a second growth curve. AI enabled the business to improve business efficiency in 22 years. By the end of 24Q3, a total of 6 large screens had been completed and operated, forming a resource matrix of a certain scale and opening up marketing scenarios in the city's core business district. The visual creative team formed by the company is deeply involved in the field of digital content creative production. AIGC technology has been integrated into the project production process as a design tool for visual generation.

Target price is $11.61, maintaining a “buy” rating

Considering the decline in gross margin, combined with Q1-Q3 results, we adjusted the 24-26 net profit forecast to be 0.107/0.176/0.215 billion yuan (previous value 0.137/0.176/0.215 billion yuan). Comparable to the company's 25-year PE 27X, considering that the outdoor large screen business has growth potential, the release of performance was delayed. It was given a 25-year 27X with a target price of 11.61 yuan (previous value 8.5), maintaining a “buy” rating.

Risk warning: The macroeconomy is weak, and the cost of using media resources is rising.