Event: The company released its report for the third quarter of 2024. The company released its report for the third quarter of 2024. In 2024Q1-Q3, the company achieved operating income of 6.182 billion yuan, -8.84% YoY; realized net profit to mother 0.098 billion yuan, or -73.02% YoY. Net profit after deducting non-return to mother was 0.13 billion yuan, -61.62% YoY. Looking at a single quarter, 2024Q3 achieved revenue of 1.795 billion yuan, -27.12%; net profit to mother -0.077 billion yuan, -166.46% year-on-year; net profit after deducting non-attributable net profit of -0.081 billion yuan, or -172.45% year-on-year.

Affected by sluggish industry demand, the company's Q3 revenue was under pressure.

The sales expense ratio has increased significantly, and the level of profit has declined. 1) Gross profit margin: +0.88pct/-0.58pct to 26.27%/21.85% year-on-year in 2024Q1-Q3/24Q3. 2) Rate side: 2024Q1-Q3 sales/management/R&D/finance rate +4.01pct/+0.67pct/-0.32pct to 17.18%/3.98%/4.40%/-1.10%; 24Q3 sales/management/R&D/finance rate +8.07pct/+1.22pct/+1.46pct/-0.03pct to 19.12%/4.48%/4.77%/-0.49%. 3) Net profit margin: The company's 2024Q1-Q3/24Q3 net margin was -3.90pct/-9.25pct to 1.48%/-4.51% year-on-year.

Profit forecasting and investment advice. Considering the significant decline in the company's revenue and profit in 24Q3, we expect the company's net profit to be 0.257/0.284/0.314 billion yuan in 2024-2026, which is -33.8%/+10.2%/+10.5% year-on-year, downgraded to an “increase in holdings” rating.

Risk warning: Consumption recovery falls short of expectations, industry competition intensifies, and channel development falls short of expectations.