The company announced third-quarter results, with Q3 revenue of 4.893 billion yuan (yoy -6.94%), net profit of 0.463 billion yuan (yoy -19.92%); 24Q1-3 revenue of 13.801 billion yuan (yoy -2.37%), net profit of 1.359 billion yuan (yoy -9.49%). Q3 The company's revenue is still under pressure. We judge that it is mainly due to weak domestic trade demand; at the same time, the decline in profit exceeds revenue. We determine that it is mainly due to the year-on-year decline in gross sales margin due to changes in business structure and increased terminal concessions. We believe that Q3 operations are in the process of bottoming out. Since October, the company's retail channel operations have been repaired. Looking forward to Q4:1) On the one hand, the intensive implementation of domestic real estate & trade-in policies is expected to drive a recovery in demand, and dealer participation will continue to increase and support the company's domestic trade performance; 2) On the other hand, export orders will continue to be strong, and Q4 foreign trade performance can still be expected. We look forward to the results of the Q4 trade-in policy. The company's operations are expected to be boosted and maintain a “buy” rating.

Domestic trade continued to be weak in Q3. We expect improvements in Q4, and the foreign trade boom will continue

Looking at the subregion, in terms of domestic trade, the recovery of the Q3 industry is still weak, and the company has divested the Tianxipai business since 24. We expect Q3 domestic trade revenue to continue to operate under pressure. Among them, functional sofas and customized businesses perform well. We expect revenue performance to record year-on-year growth; under demand pressure, the company is steadily advancing the overall integrated strategy, integrating the increase in the share of major stores, and continuing to consolidate the basic domestic trade operation capacity; at the same time, the company's terminal retail channel operations have been repaired since October, driven by trade-in policies across the country. In terms of foreign trade, early orders are gradually transmitted to the revenue side. We expect the company's foreign trade revenue to continue to perform well in Q3. The current order boom is still high, and the Q4 foreign trade performance can still be expected.

Q3 gross sales margin -4.0pct year-on-year, and Q3 expenses ratio -2.7pct year-on-year under cost reduction and fee control

24Q1-3's gross sales margin fell 0.47 pct year on year to 31.9%, of which Q3 fell 4.0 pct year on year to 29.8%. We judge that it was mainly due to: 1) the decline in revenue and the weakening of rigid cost amortization; 2) the decline in the share of domestic trade business with high gross margins brought about changes in the business structure; 3) increased terminal concessions under pressure from the industry. The 24Q1-3 company's expense ratio also increased by 0.35 pct to 20.1%. Among them, the sales expense ratio decreased by 0.28 pct to 15.9%, the management+R&D expenses ratio increased by 0.42 pct to 3.99%, and the financial expenses ratio also increased by 0.21 pct to 0.15%. We judge that this was mainly due to a decrease in exchange earnings due to the appreciation of RMB. Q3 The company strengthened cost reduction and fee control, and the cost rate for the single quarter period was -2.7 pct to 17.9% year on year.

Profit forecasting and valuation

Based on the Q3 performance and considering the weak recovery in domestic trade, we lowered the company's domestic trade revenue forecast. The net profit for 24-26 is 1.922/2.091/2.274 billion yuan respectively (previous value 2.092/2.321/2.581 billion yuan), and the corresponding EPS is 2.34/2.54/2.77 yuan, respectively. Referring to the 25-year Wind of comparable companies, the average PE value is 11 times, taking into account the company's excellent organizational management capabilities, retail operations/supply chain management/warehousing It has outstanding performance advantages such as matching. The company was given 17 times PE in 25 years, the target price was 43.18 yuan (previous value 35.70 yuan), and maintained a “buy” rating.

Risk warning: Demand recovery falls short of expectations, raw material prices fluctuate greatly, and there is a risk of exchange rate fluctuations.