Incident: On October 28, the company released its 2024 three-quarter report. 2024Q1-3 achieved operating income of 0.808 billion yuan/YoY +23.52%, net profit of 0.072 billion yuan/year over year, net profit of 0.062 billion yuan/YoY +240.77% after deducting net income of 0.062 billion yuan/YoY +240.77%; single 2024Q3 achieved operating income of 0.264 billion yuan/year on year +32.27%, net profit to mother 0.005 billion yuan/year on year The same period of the year was -0.015 billion yuan, net profit after deducting non-attributable net income was 0.002 billion yuan/-0.017 billion yuan for the same period last year.

Expanding Brand+ Channels promotes a steady increase in proxy operations, and the brand incubation business continues to grow rapidly. 1) Proxy operation services: 2024Q1-3 revenue increased 23.21% year-on-year, mainly due to: ① Channel: The company continues to take advantage of its dominant position in the field of apparel, actively expanding Douyin channel proxy operations to drive the continuous growth of the original service brand; ② Brand: The company actively expanded new brands and introduced high-end soft toy project Jellycat, sportswear brand Champion, and sports equipment brand Under Armour all achieved good results, thus driving the rapid growth of proxy operation services. 2) Brand incubation and management: 2024Q1-3 revenue increased 143.36% year over year, mainly due to the two incubated brands Cumlaude Lab and Zuccari actively expanding sales channels, continuously expanding the volume and influence of the industry, and forming a good consumer mentality in the minds of consumers, thus driving sales revenue to maintain rapid growth.

Gross profit performance continues to be optimized, and sales expenditure investment has increased. 1) On the gross profit side, the gross margin of the 2024Q3 company was +20.29pct to 50.02%, or the low gross profit base due to the inventory clean-up of distribution projects in the same period last year; 2) On the cost side, the sales, management/R&D/financial expenses ratio of the 2024Q3 company was +12.27pct/-2.16pct/-2.29pct/+0.59pct to 31.03%/15.05%/4.16%/-0.12%. The increase in sales expenses was mainly due to e-commerce channel retail sales for the 2024Q3 brand incubation and management business This is due to an increase in marketing fees and platform fees. The overall period expense ratio was +8.41pct to 50.12%; 3) On the profit side, 2024Q3's net interest rate to mother was +9.25pct to 1.96% year over year.

Investment advice: The company provides one-stop integrated e-commerce services for global brands, is deeply involved in proxy operation services, has built a comprehensive e-commerce service ecosystem, and has an extensive and high-quality brand customer base in major apparel and other fields. In the future, the company will continue to expand leading brand customers in the field of clothing, stabilize the basic market of proxy operation services; increase investment in brand incubation business, focus on the big health/pet food sector to create a second growth curve; and gradually improve the level of digital services and technical service capabilities. As the consumption environment recovers, the company's performance is also expected to be further released. Referring to 2024Q3 results, we expect the company to achieve operating income of 1.253/1.512/1.733 billion yuan, net profit of 0.152/0.22/0.283 billion yuan, EPS of 1.64/2.38/3.06 yuan/share, respectively, corresponding to the current valuation of 25.5X/17.7X/13.7XPE.

Risk warning: 1) macroeconomic impact; 2) intense market competition; 3) Business development falls short of expectations.