Incident: In the first three quarters of 2024, the company achieved operating income of 0.425 billion yuan, -9.44% year-on-year, and realized net profit of 0.068 billion yuan, or -16.62% year-on-year. Single Q3 achieved revenue of 0.165 billion yuan, +42.29% year over year, and realized net profit to mother 0.027 billion yuan, or +395.58% year over year.
The number and scale of the Q3 exhibition increased. The company's Q3 exhibition schedule increased compared to the same period last year. A total of four exhibitions were held in the US, Mexico, Brazil, and South Africa, compared to three exhibitions in Turkey, Japan, and South Africa in the same period in 2023. Looking at the scale of the exhibition, according to the company's official account, more than 400 companies participated in the US exhibition, with an exhibition area of 0.01 million square meters; the Mexican+Brazil exhibition had 8 major industry professional exhibitions, with a total exhibition area of more than 0.037 million square meters, over 45 categories, and nearly 1100 Chinese enterprises participated in the exhibition; and the South African exhibition had more than 290 companies participating in the exhibition, with an exhibition area of nearly 0.01 million square meters.
Benefiting from operating leverage, the company's Q3 net interest rate increased year-on-year. The 3Q24 company achieved a gross profit margin of 43.85% /year over year - 9.7pct. We expect it is mainly due to the reduction in subsidies for exhibitions in various regions this year, leading to the company's increased discounts. In addition, it is also affected by the fact that new US exhibitions are in the early stages of climbing. In terms of period expenses, 3Q24's sales expenses and management expenses were 0.034 billion yuan and 0.015 billion yuan respectively, which was the same as the same period last year. However, the sales expense ratio and management expense ratio benefited from an increase in revenue scale of 20.7% /year over year -6.6 pct and 8.9% /-1.7 pct, respectively, driving up the net interest rate by 4.8 pct to 16.6%. Investment advice: In the medium term, we believe that the future growth path of the company will still lie in the three-dimensional expansion of exhibition scale, quantity, and unit price (professional exhibition+digital service), combined with flexible management and incentive mechanisms for private enterprises. Looking at the short term, considering recent improvements in local government debt+the geopolitical relationship between China and India, we believe there is a possibility of marginal improvement in the company's demand and exhibition regional arrangements next year. We expect net profit to be 0.23, 0.32, and 0.39 billion yuan each for 2024-26, corresponding to PE of 19X, 14X, and 11X, maintaining the “recommended” rating.
Risk warning: (1) risk of exhibition sales falling short of expectations; (2) risk of geopolitical conflict; (3) risk of export trade decline.
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