The company achieved revenue of 0.416 billion yuan (yoy +8.50%, qoq +2.21%) and net profit of 0.124 billion yuan (yoy +14.88%, qoq -21.00%) in Q3. In Q1-Q3 '24, we achieved revenue of 1.206 billion yuan (yoy +7.77%), net profit of 0.358 billion yuan (yoy +20.17%), deducting non-net profit of 0.353 billion yuan (yoy +19.76%). 24Q1-Q3's gross profit margin was 80.08%, 1.60pct; 24Q1-Q3 sales expense ratio was 34.41%, down 1.54 pct; management expense ratio was 8.98%, same increase 0.64 pct.

Under the combined influence, the company's 24Q1-Q3 net interest rate was 29.03 percent, up 2.78 pcts year-on-year. We are optimistic about the company's competitive advantage in B2B cross-border e-commerce. AI empowerment is expected to open up future growth space and maintain a “buy” rating.

China's manufacturing network is developing steadily, and the effects of organizational restructuring are gradually showing

China's manufacturing network revenue is expected to grow steadily, but the growth rate is slower than in Q2. However, the company has taken relevant measures, and it is expected that the revenue side growth rate will be boosted in the future. 1) On the operational side, Made in China Network has taken a series of measures, including optimizing website performance, optimizing traffic structure, and launching a buyer app matrix (such as lightweight versions, heavy industry, and small-language apps for emerging markets), etc., which have achieved results in increasing traffic. 2) At the management level, adjustments have been made to the China Manufacturing Network Division, separating the sales department from the non-sales department, and opening up more market space for overseas buyers to enhance the service experience and stickiness of buyers. It is expected to consolidate the company's competitiveness in the medium to long term.

AI products continue to be iterated, and the “AI+ Cross-border” product Mentarc was released in October. The company released the “AI+ Cross-border” product “Mentarc” (Mentarc) to the world. In the form of an AI Agent (AI Agent), it solves various problems such as product selection, supply search, and store operation for global distributors and cross-border e-commerce sellers. The launch of Mentarc is a new attempt by Focus Technology to expand the application field of AI technology to the cross-border e-commerce industry chain, and is expected to continue to empower the company's business growth.

In addition, the 4.0 version of AI Michael was newly upgraded, enabling 24-hour online reception and in-depth application of multi-lingual real-time translation AI technology in the field of foreign trade for foreign trade enterprises during the Golden Autumn Fair in August, which became a new driving force for order growth.

Profitability continues to improve, maintaining a “buy” rating

Considering the month-on-month decline in the company's China Manufacturing Network revenue growth rate, we lowered our China Manufacturing Network revenue forecast. After lowering the company's profit forecast, we expect the company's net profit to mother for 2024-2026 to be 4.56/5.20 /0.587 billion yuan, respectively (previous value 0.482/0.556/0.645 billion yuan). Comparable to the 25-year Wind, the average PE was expected to be 21 times. Considering that the company's AI products continued to be implemented, the competitive advantage in B2B cross-border e-commerce was stable. The company was given 22 times PE in 25 years, with a target price of 36.09 yuan (previous value of 30.41 yuan), maintaining a “buy” rating.

Risk warning: AI technology development falls short of expectations, foreign trade falls short of expectations, and industry competition intensifies.