The company released a three-quarter report: Q3 achieved revenue of 0.896 billion yuan (yoy -13.91%) and net profit to mother of 50.093 million yuan (yoy -44.22%). 24Q1-Q3 achieved revenue of 2.416 billion yuan (yoy -5.15%) and net profit of 0.12 billion yuan (yoy -28.09%) to mother. The company's Q3 revenue declined. We judge that it was mainly due to a decline in retail and engineering channel revenue due to weak terminal demand; Q3 profit performance was clearly weaker than revenue. We determined that it was mainly due to the weakening of the effects of the decline in revenue scale on rigid costs and cost dilution, as well as a phased increase in terminal concessions. Looking ahead to Q4, the intensive implementation of domestic real estate & trade-in policies is expected to drive a recovery in demand and restoration of industry chain sentiment. Along with the expansion of trade-in policy subsidies, terminal retail channels are expected to recover. The current valuation is cost-effective and maintains the “gain” rating.

Revenue from Q3 retail and engineering channels was under pressure. Looking at the better overseas channel growth rate, 24Q1-3 retail revenue also fell 17.0% to 1.157 billion yuan, with Q3 -19.8% year-on-quarter to 0.464 billion yuan; on the engineering side, 24Q1-3 bulk revenue also increased 4.44% to 0.913 billion yuan, of which Q3 was -11.3% to 0.313 billion yuan; in addition, the company actively explores overseas markets, overseas channels 24Q1-3 The same increase was 26.63% to 0.254 billion yuan, of which the Q3 single quarter also increased 14.9% to 0.087 billion yuan, and the growth rate was excellent. Furthermore, in the first three quarters, the company achieved relatively rapid growth in businesses such as home improvement, bags, and administrative reform, and the new retail strategy and overseas strategy gradually came to fruition. By category, 24Q1-3 cabinet/wardrobe and accessory/wooden door revenue was -6.11%/-5.91%/-2.91% to 1.475/0.69/0.153 billion yuan, respectively, and -15.5%/-12.9%/-10.7% in the Q3 quarter to 0.528/0.272/0.06 billion yuan, respectively.

In the first three quarters, gross sales margin also decreased by 1.60 pct, and net sales margin decreased by 1.65 pct24q1-3. Of these, the gross margin for Q3 fell by 1.47 pct to 28.33%. We determined that it was mainly due to the weakening of the effects of declining revenue scale on rigid costs and cost dilution, as well as the phased increase in terminal concessions. The cost ratio also increased by 0.28 pct to 23.47% during the 24Q1-3 period, with the sales expense ratio falling 1.32 pct to 11.53%, mainly due to a decrease in advertising expenses and marketing expenses; the management+R&D expenses ratio also increased by 1.28 pct to 11.79%, mainly due to the weakening of the cost dilution effect of declining revenue; and the financial expense ratio also increased by 0.32 pct to 0.14%, mainly due to the increase in interest expenses generated by the company issuing convertible corporate bonds. Under the combined influence, the company's 24Q1-3 net sales margin fell 1.65pct year on year to 4.75%.

Profit forecasting and valuation

Based on the company's Q3 performance, considering that demand has yet to recover, we lowered our revenue forecast. We expect net profit to be 0.244/0.267/0.291 billion yuan for 24-26 (previous value 0.306/0.338/0.371 billion yuan), and the corresponding EPS is 1.58/1.73/1.88 yuan, respectively. Referring to comparable company's 25-year Wind, the average PE value is 15 times, giving the company 15 times PE in 25 years, with a target price of 25.95 yuan (previous value) 23.76 yuan), maintaining the “gain” rating.

Risk warning: Demand recovery fell short of expectations, real estate sales declined, and channel expansion fell short of expectations.