Incident: On October 30, 2024, the company released the 2024 third quarter report. 24Q1-3 achieved revenue of 1.433 billion yuan, a year-on-year increase of 26.49%, and net profit to mother of 0.108 billion yuan, an increase of 17.13% year-on-year, after deducting non-return net profit of 0.089 billion yuan, an increase of 6.28% year-on-year. 2024Q3 achieved revenue of 0.46 billion yuan, a year-on-year increase of 6.47%, and realized net profit of 0.042 billion yuan, an increase of 53.9% year-on-year, after deducting non-attributable net profit of 0.026 billion yuan, an increase of 1.33% year-on-year.

Gross margin declined year on year: 24Q3 gross margin was 42.82%, down 3.43 pcts year over year.

The cost rate decreased year on year: the cost rate was 35.16%, down 2.89pct year on year during the 24Q3 period. Among them, the sales expense ratio was 28.96%, down 4.48pct year on year, and the fee control effect was remarkable. The management fee rate was 5.95%, up 0.72 pct year on year, the R&D cost rate was 0.48%, up 0.1 pct year on year, and the financial cost ratio was -0.24%, up 0.76 pct year on year.

Profit margin increased year on year: Net profit margin for 24Q3 was 9.09%, up 2.8 pct year on year, mainly due to government subsidy contributions. Net interest rate without return to mother was 5.74%, down 0.29 pct year on year.

Actively embrace emerging channels and develop a long-term health strategy. The company has adopted a diversified channel layout. In recent years, it has actively developed emerging channels such as mass sales of snacks and Douyin to achieve a relatively rapid growth rate. Looking ahead to Q4. Good growth is expected to be achieved under the impetus of e-commerce festivals and New Year's goods festivals. As a leader in domestic oats, the company's strategic merger and acquisition of Desai Kanggu is expanding horizontally around oats. Furthermore, it is expanding the health sector based on oats. Since last year, it has launched products such as protein powder, Chinese health care, and medicinal food. The market feedback is good, and we are optimistic about the company's long-term development.

Investment advice: We expect the company's 2024-2026 revenue to be 1.992/2.441/2.94 billion yuan, respectively, up 26.22%/22.56%/20.45% year on year. We expect the company to achieve net profit of 0.123/0.16/0.202 billion yuan in 2024-2026, up 6.48%/30.19%/26.47% year on year, respectively, corresponding to the PE of 23.1/17.7/14.0X for 24-26, giving a “recommendation ” Ratings.

Risk warning: New product promotion falls short of expectations, macroeconomic downturn, channel expansion falls short of expectations, etc.