Incident: The company released its 2024 three-quarter report. In the first three quarters, it achieved revenue of 0.89 billion yuan, an increase of 16.8% year on year; realized net profit of 0.12 billion yuan to mother, an increase of 14.3% year on year. Among them, 24Q3 achieved revenue of 0.36 billion yuan, a year-on-year increase of 28%; net profit to mother was 0.045 billion yuan, an increase of 75.2% year-on-year, and the company's performance far exceeded market expectations. In addition, the company plans to distribute a cash dividend of 1 yuan (tax included) for every 10 shares to all shareholders.

Other businesses have experienced explosive growth, and the pace of expansion across the country has been smooth. By business, in the Q3 single quarter, Phoenix Claw, Pig Skin Crystal, and other businesses achieved revenue of 0.22/0.02/0.07 billion yuan, respectively, +3.6%/+17.2%/+1593% year-on-year.

Revenue from other businesses has increased dramatically, mainly due to the rapid release of the company's new duck palm products through newly expanded membership-based warehousing supermarket channels; the main business of Pineapple has maintained a steady growth trend under a high base. By channel, 24Q3's online/offline channel revenue growth rate was +263%/+12.9%, respectively. Online channels benefited from a low base to achieve rapid growth. Looking at the subregion, revenue in the 24Q3 Southwest/East China/South China/Central China region was +5%/+16.7%/+39%, respectively; the southwest base maintained a steady growth rate under a high base; the pace of expansion outside the province continued, and East China achieved relatively rapid growth with the support of emerging channels and costs, and the South China region benefited from new channel development and high growth.

Reduced costs+reduced sales fees led to a significant increase in profitability in Q3. The gross margin of the 24Q3 company was 30.1%, -0.6pp; of these, the Q3 single quarter gross margin was 28.9%, +1.9pp year on year. The increase in gross margin in a single quarter in Q3 was mainly due to the gradual introduction of some low-priced raw materials and the continuous improvement of the superimposed product structure. In terms of cost ratio, 24Q3's sales expense ratio was -4.5pp to 9.3% year on year, mainly due to the company actively controlling cost investment. Q3 sales expenses decreased 13.8% year over year, and membership supermarket channels can also contribute a large amount of revenue at low cost; 24Q3 management expenses ratio -0.6pp to 3.2% year on year. The company continues to carry out special actions to improve quality and efficiency, and lean management capabilities are continuously improving. Taken together, 24Q3's net interest rate was +3.4pp to 12.6% year-on-year, driven by declining costs and sales fee cuts.

The Phoenix Claw Circuit still has great potential, and the performance of emerging channels is worth looking forward to. 1) The snack food industry as a whole continues to expand. Among them, spicy snack foods benefit from the spicy habits of young consumers, and the growth rate is superior to other sub-tracks.

As a leader in casual snacks, the company's market share has remained at 30% + for a long time, and it is expected that it will continue to enjoy the dividends of increased industry concentration. 2) The company has formed a rich matrix of halogenated leisure products. In addition, pickled pepper and chicken claw products enjoy high popularity throughout the country. As subsequent cost-side pressure gradually eases, the company's profitability is expected to gradually increase in the future. 3) The company began expansion outside the province with East China as the center, and gradually moved towards nationalization. As the company continues to embrace emerging channels such as online and new retail; in particular, membership-based supermarket channels with extremely low cost investment requirements, it is expected to become a key engine contributing to revenue growth and channel expansion in the future. It is worth looking forward to the company's achieving both quantitative and profit revenue in the future.

Profit forecasting and investment advice. EPS is expected to be 0.36 yuan, 0.48 yuan, and 0.62 yuan respectively in 2024-2026, and corresponding dynamic PE will be 24 times, 18 times, and 14 times, respectively. The company was given 22 times PE in 2025, corresponding to a target price of 10.56 yuan, maintaining a “buy” rating.

Risk warning: Nationalization falls short of expectations, risk of continuous rise in raw material prices, food safety risks.