Incident: On October 29, 2024, the company released its 2024 three-quarter report. 2024Q1-Q3 achieved operating income of 0.837 billion yuan, a year-on-year decrease of 11.16%; realized net profit due to mother of 0.013 billion yuan, a year-on-year correction; and realized deducted non-net profit of 0.009 billion yuan from mother, a year-on-year correction.

Key points of investment:

24Q3 results fell short of expectations. In 2024Q1-Q3, Beieasy achieved operating income of 0.837 billion yuan, a year-on-year decrease of 11.16%; achieved net profit to mother of 0.013 billion yuan, which was corrected year-on-year; and achieved non-net profit deducted to mother of 0.009 billion yuan, a year-on-year correction. Among them, in the Q3 single quarter, the company achieved operating income of 0.233 billion yuan, a year-on-year decrease of 32%; realized net profit to mother of -0.013 billion yuan, turning negative year-on-year; and realized deducted non-net profit of -0.015 billion yuan, which turned negative year-on-year. 24Q3 The company's revenue and performance fell short of expectations. It is expected to be mainly due to adjustments in the company's sales strategy, which led to a decrease in revenue. At the same time, some expenses were more rigid, causing profit to turn into loss in a single quarter.

Online channels are under pressure from a high base, and the offline channel layout continues to be optimized. In terms of online channels, according to Jiuqian data, the company's online sales were -39% year-on-year in the third quarter, mainly due to the company's launch of a popular product, the neck massager N5 mini, during the same period last year, due to the high revenue base. In terms of offline channels, as of June 30, 2024, the company had 133 direct offline stores, with a total of 63 distribution stores, compared to the end of 2023 - 10/+19, respectively. In 2023, the company officially launched a new business model to attract investment from provincial retail service providers. Through the existing channels of provincial retail service providers, the company effectively develops blind spots in the market, especially penetration and development into second-tier and third-tier cities and even sinking markets, and plans to gradually penetrate the layout at multiple outlets in the province through the excellent market expansion capabilities of provincial service providers, radiating brand influence to more and wider core regions, giving full play to the synergy between brands and stores. In terms of overseas channels, the company has set up online direct stores and independent overseas websites through platforms such as Amazon and TikTok, and has set up subsidiaries in major business regions to assist in the development and development of overseas offline channels.

Sales expenses increased, and 24Q3 profitability was under pressure. 2024Q3 achieved a gross profit margin of 66.80%, an increase of 2.94 pcts over the previous year, setting a new high gross margin in a single quarter since the company went public. It is expected to be mainly due to improved product structure. In terms of period expenses, the sales expenses ratio was 59.99%, an increase of 6.37 pcts over the previous year. It is expected to be mainly due to the decline in revenue but the rigidity of some channel fees. The management cost ratio was 7.25%, up 3.06 pcts year on year, financial expense ratio 0.48%, and 0.90 pcts year over year. The net profit margin for 24Q3 was -5.59%, down 8.22 pcts year over year.

Lower the profit forecast and maintain the “increase in holdings” investment rating. The company's 24Q3 operations were under pressure. We lowered our profit forecast. We expect net profit to mother of 0.027, 0.065, and 0.097 billion yuan in 2024-2026 (previous values were 0.062, 0.084, and 0.118 billion yuan), respectively, and corrected, +137.2%, and +49.8%, respectively. We use Covos, Stone Technology, and Aojiahua as comparable companies. The average PEG of the company in 24 years was 1.24 times, and the company's PEG in 24 was 1.14 times. Corresponding to the current market capitalization, there is room for a 9% increase in market value, maintaining an “increase” investment rating.

Risk warning: risk of fluctuations in raw material prices; risk of new product launches falling short of expectations; high sales expense ratio. On July 11, 2024, the company announced the “Notice on Response to the Regulatory Inquiry Letter on Information Disclosure Regarding the 2023 Annual Report”. A special reminder is hereby made.