The company's third-quarter revenue increased 10.9% year over year. Tianwei Foods achieved total operating income of 2.364 billion yuan in the first three quarters of 2024, up 5.84% year on year; achieved net profit of 0.432 billion yuan, up 34.96% year on year; realized net profit after deducting 0.389 billion yuan, up 38.10% year on year; achieved total operating income of 0.897 billion yuan in the third quarter of 2024, up 10.93% year on year; achieved net profit of 0.186 billion yuan, up 64.79% year on year; achieved Net profit after deducting non-return to mother was 0.179 billion yuan, up 73.44% year over year.

The growth rate of offline channels has been corrected, and online channels have maintained a high growth rate. In the third quarter of 2024, the company's offline/online channel revenue was 0.76/0.14 billion yuan, +6.0%/+55.4% year-on-year. Offline channels changed from negative to positive, while online channels continued to contribute high momentum from food extracts. Revenue from hot pot seasoning, Chinese food seasoning, and sausage and bacon seasoning was 0.3/0.38/0.19 billion yuan respectively, +1.1%/+18.1%/+19.7% compared with the same period last year. Chinese cuisine seasoning was the most important source of overall improvement. Also, in the third quarter of 2024, the number of the company's dealers decreased by a net of 21 month-on-month to 3129.

Gross sales margin increased substantially, and profitability improved markedly. In the third quarter of 2024, the company's gross margin reached 38.8% year-on-year. It is expected that, on the one hand, the share of online channels with high gross margin will continue to increase, and on the other hand, the low cost price of raw materials. In the third quarter of 2024, the company's sales/management expenses ratio was 7.8%/5.2%, -7.8/-0.8 pct. It is expected that the implementation of fee control measures and equity payment expenses will decrease year-on-year during the period. The gross sales margin for the third quarter of 2024 will increase by 8.6 pct to 31%, and operating efficiency will increase significantly. On this basis, the company's net interest rate after deduction for the third quarter of 2024 was 19.9%, an increase of 7.2 pct over the previous year, achieving significant improvements.

Food extracts maintain high potential energy, and the collaborative layout is gradually improved. The company's good performance in the third quarter was due, on the one hand, to the restoration of peak channel performance during the peak season, and on the other hand, the release of energy storage from previous channel-side management collaboration. It is expected that the company's product side will actively develop regional specialty products on the basis of cultivating major national products and continue to improve the product matrix. The channel side will use food extracts as an incision, and a comprehensive layout will gradually take shape.

Risk warning: The cost and price of raw materials have increased dramatically, competition in the industry has intensified, and the recovery in catering demand falls short of expectations, etc.

Profit forecast and investment advice: Considering the weak performance of restaurants, we lowered our previous profit forecast. We expect the company to achieve total operating income of 3.39/3.74/4.05 billion yuan in 2024-2026 (the previous forecast value was 3.63/4.15/4.75 billion yuan), 7.6%/10.5%/8.3%; the company is expected to achieve net profit to mother 0.57/0.63/0.68 billion yuan in 2024-2026 (the previous forecast value was 0.55/0.66/0.69 billion yuan), 25.2%/11.0%/7.7% YoY . In summary, the company is expected to achieve EPS of 0.54/0.60/0.64 yuan in 2024-2026, and the current stock price corresponding to PE is 26.5/23.9/22.2 times, respectively, maintaining a superior market rating.