Incident Overview

24 In the first three quarters, the company's revenue/net profit attributable to mother, net profit after deducting non-attributable net profit/net operating cash flow were $5.00/0.009/0.004/-0.06 billion yuan, respectively, down 7.54%/28.84%/56.38%/153.72% year-on-year. In 24Q3, the company's revenue/net profit attributable to mother/net profit deducted from mother was 0.172/0.0004/0.0001 billion yuan, down 5.09%/43.85%/-168.17% year over year. We analyzed that the decline in revenue in a single quarter was mainly affected by Panshan Mountain and some agency brands. The marginal profit was mainly dragged down by losses at Squirrel Park. Non-recurring profits and losses are mainly government grants of 2.77 million yuan.

Analytical judgment:

Revenue declined in 24Q3, and the X trend remained unchanged. According to our analysis, the decline in revenue in a single quarter was mainly affected by Panshan Mouse and some agency brands, while the X brand maintained a high double-digit growth trend.

The increase in 2024Q3 gross margin and the decline in net interest rate were mainly due to the increase in the period expense ratio and the increase in the proportion of credit+asset impairment losses. (1) The company's gross margin in 2024Q3 was 53.2%, up 2.3 PCT year on year. The increase in gross margin was mainly due to the increase in X share; net profit margin was 1.7%, down 0.2 PCT year on year. The 24Q3 sales/management/R&D/finance expense rates were 14.9%/1.9%/2.8%/1.2%, respectively, up 2.5/0.4/0.7/-0.7PCT; the share of other+ investment income increased by 0.3 PCT; the share of credit+ asset impairment losses increased by 1.1 PCT; and the share of income tax decreased by 1.0 PCT. (3) The company's gross margin for the first three quarters of 2024 was 56.2%, an increase of 4.0PCT over the previous year. The company's net interest rate for the first three quarters of 2024 was 1.7%, down 0.5 PCT year on year. The increase in gross margin, but the decline in net interest rate was mainly due to an increase in the cost ratio during the period and a decrease in the share of non-operating income. The sales/management/R&D/finance expense ratios for the first three quarters of 2024 were 14.0%/2.5%/2.5%/1.3%, respectively, with a year-on-year increase of 1.9/1.1/0.2/-0.3 PCT. The share of net income from other + investments increased by 1.7 PCT; the share of credit+ asset impairment losses increased by 1.2 PCT year on year; the share of non-operating income/income decreased by 0.2 PCT; and the income tax rate decreased by 1.2 PCT year on year.

Inventory has increased, and the number of inventory turnover days has increased dramatically. At the end of 2024Q3, the company's inventory was 0.517 billion yuan, an increase of 15.8% over the previous year. The number of inventory turnover days was 564 days, an increase of 151 days over the previous year. The company's accounts receivable were $0.033 billion, up 13.7% year over year. The number of accounts receivable turnover days was 18 days, an increase of 5 days over the previous year. Accounts payable was $0.055 billion, up 24.4% year on year. Accounts payable turnaround days was 48 days, an increase of 17 days over year.

Investment advice

We analyzed that (1) the outdoor racetrack is still a growth track against the backdrop of low overall consumption in 24 years. We analyzed that delivery of Q4 by X brand dealers is expected to accelerate. Furthermore, the X brand released a fleece series and newly launched footwear categories in collaboration with SHOELLER this year, which is expected to become a new growth point. (2) The outdoor aesthetic brand HOUDINI, CRISPI, and the three online brands are still worth looking forward to. Considering the loss drag of Squirrel Park, the profit forecast was lowered to maintain the 24-26 revenue forecast of 0.881/1.097/1.33 billion yuan; the 24-26 net profit forecast was lowered to 0.041/0.06/0.076 billion yuan to 0.02/0.06/0.076 billion yuan, corresponding to a reduction in the 24-26 EPS forecast of 0.26/0.38/0.58 yuan to 0.13/0.38/0.58 yuan, closing on October 28, 2024 The price of 11.18 yuan corresponds to the 24/25/26 PE valuation of 88/29/23X, maintaining the “gain” rating.

Risk warning

X-BIONIC operations fell short of expectations; passenger flow recovery at Squirrel Park fell short of expectations; offline store expansion fell short of expectations; systemic risks.