Incident Overview. On October 30, 2024, Acer released its 2024 three-quarter report. With 24Q1-Q3, the company achieved revenue of 4.859 billion yuan, +8.01% year on year, net profit of 0.316 billion yuan, +0.95% year on year, net profit without return to mother was 0.31 billion yuan, +0.77% year on year; of these, in 24Q3, the company achieved revenue of 1.428 billion yuan, -4.36% year on year, net profit attributable to mother 0.086 billion yuan, -17.21% year on year, net profit without return to mother 0.085 billion yuan , YoY -17.71%.

Gross profit margin declined year on year and rates were reduced, and net profit margin declined slightly. 1) Gross margin side: 24Q1-Q3, gross margin of 24.16%, YoY -2.58 pct; 24Q3, gross margin of 24.20%, YoY -2.25 pct.

2) Expense rate side: 24Q1-Q3, sales rate, management rate, R&D rate, and finance rate were 11.62%, 2.00%, 0.90%, and 0.49%, respectively, -1.96, +0.13, -0.14, -0.07 pct; 24Q3, sales rate, management rate, R&D rate, and finance rate were 12.25%, 2.19%, 1.03%, and 0.44%, respectively. 3) Net margin side: Based on gross margin and expense ratio, 24Q1-Q3, net margin was 6.50%, -0.52 pct year on year; 24Q3, net margin was 5.96%, -1.03 pct year on year.

Continuing to strengthen the brand's imprint, the first overseas store was opened, and the launch of new products was well received. 1) Channel side:

By the end of 24Q3, the total number of stores was 1,763. By industry, there were 1,491 jewelry stores and 272 leather goods stores; by model, there were 1,413 agency stores and 350 self-operated stores. As of the end of September '24, the total number of “CHJ Chaohongji” jewelry stores was 1,482, of which 1,236 were franchised stores (a net increase of 126 compared to the beginning of the year). In August '24, Acer opened the brand's first overseas store in IOI Citymall, Kuala Lumpur, Malaysia, to steadily advance the brand's global strategic layout. 2) Product side: Chao Hongji Jewelry continues to be deeply involved in the brand imprint series. The “Flower Silk Ruyi” and “Flower Silk Complete” series, which were co-designed by famous international artists/designers, and the “Zhenjin Fanhua” and “Zhenzang” series of new products were well received after launch; continued to increase research and development of advantageous gold product lines, optimize the IP series product layout, and enhance the added value and competitiveness of the products; C? Vol Jewelry continued product development, and launched a series of products such as “Morse Code”, “Diyao”, and “Double Diamond Double Life” in the third quarter; FION upgraded original leather series bags such as “stacked bags” and “shell bags” based on heavy craftsmanship, adding handmade packaging and buckles, and combining channel characteristics to create a differentiated product matrix.

Investment suggestions: The company's product innovation capabilities are outstanding, the franchise channel is accelerated, and the multi-brand matrix drives growth. The company is expected to achieve revenue of 6.568, 7.588, and 8.419 billion yuan in 2024-2026, +11.3%, +15.5%, and +11.0%, respectively; net profit to mother is 0.361, 0.414, and 0.458 billion yuan, respectively, +8.3%, +14.7% and +10.5%. The closing price on October 31 corresponds to PE of 12, 11 and 10 Double, maintaining a “recommended” rating.

Risk warning: Competition in the industry intensifies, store expansion is less than expected, terminal demand falls short of expectations, etc.