Incident: On October 27, the company released its 2024 three-quarter report. 2024Q1-3 achieved operating income of 1.012 billion yuan/year over year, achieved net profit of 0.004 billion yuan/year over year, net profit of 0.004 billion yuan/year over year, net profit of 0.006 billion yuan/year over year +84.61% after deducting net income of 0.296 billion yuan/year over year; single 2024Q3 achieved operating income of 0.296 billion yuan/year on year The same period was -0.014 billion yuan, net profit after deducting non-attributable net profit -0.006 billion yuan/-0.016 billion yuan for the same period last year.

Mainstation traffic remains steady, and GEN2 optimization and overseas layout are actively promoted. 1) Main site business remains steady. According to the 2024 semi-annual report, the average number of monthly active users in the first half of 2024 was 37.7903 million/ +1.62%, and the total number of content published on 2024H1 was 15.4362 million posts/year over year +21.89%. Among them, UGC/AIGC content contributions were +8.74%/+46.03%, respectively, and AIGC accounted for 39.61% /year over year +6.55pct. 2) Accelerate the promotion of AI strategies and actively deploy overseas. ① GEN2:

The 2024Q3 is worth buying GEN2 has entered the closed beta stage and is gradually being released based on closed beta data and user feedback. ② AI Strategy: The 2024Q3 is worth buying to achieve further breakthroughs in the field of “building an AI ecosystem with big model partners”. In September, AI assistants entered Tencent Yuanbao's “Smart Device Brand Zone” with a “small value”, and they have successively reached strategic cooperation with Tencent Cloud and Huawei to further deepen cooperation with Baidu Cloud. ③ Going overseas: The company promotes the “worth buying” model through self-operation and cooperation. As the first stop, the Thai version of “Zestbuy”, which is worth buying, was launched in August. Hainan Numerical Technology Co., Ltd., a wholly-owned subsidiary of the company, completed the establishment of 3 wholly-owned overseas subsidiaries/subsidiary companies in 2024H1, and completed the ODI (Overseas Direct Investment) filing in September.

Gross profit has recovered, and costs have been greatly optimized. 1) On the gross profit side, 2024Q3 gross margin +1.40pct to 44.21% year on year, or due to the optimization of the company's operating costs; 2) On the cost side, the company's 2024Q3 sales/management/ R&D/finance expenses ratio -3.83pct/-0.17pct/-0.25pct to 16.11%/15.10%/13.64%/-0.14%, overall period expense ratio -4.91 pct to 44.71% year on year; 3) profit side, 2024Q3 net profit margin was +3.71 pct year over year to -1.30%.

Investment advice: As a platform with user, content, and word-of-mouth advantages, the company thoroughly lays out the three core business segments of consumer content, marketing services, and consumer data, and continuously promotes product and content optimization and upgrading. We are optimistic about the company's ability to expand and iterate as a leader in the segment. Since the company invested more in advancing AI strategy and overseas layout in 2024, and referring to the company's performance in the third quarter of 2024, we adjusted the revenue for 2024-2026 to 1.53/1.76/1.98 billion yuan, net profit to mother 0.078/0.125/0.161 billion yuan, EPS was 0.39/0.63/0.81 billion yuan per share, respectively. The current price corresponding PE is 71.7X/44.8X/34.7X, maintaining a “buy” rating.

Risk warning: 1) New business expansion falls short of expectations; 2) Industry recovery falls short of expectations or increased competition; 3) E-commerce platform policy changes; 4) Policy regulatory risks