The general trend of the industry is dragging down performance. It is expected that the upward inflection point of performance has reached, and the “buy” rating will be maintained

The company released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved revenue of 4.91 billion yuan, or -11.51%; realized net profit due to mother 0.033 billion yuan, -77.22% year-on-year; and realized net profit deducted from non-mother 0.001 billion yuan, or -99.04% year-on-year. In 2024, Q3 achieved revenue of 1.7 billion yuan, -7.81%; realized net profit attributable to mother 0.028 billion yuan, or -44.89% month-on-month; realized net profit deducted from mother 0.018 billion yuan, or -56.10% month-on-month. Considering that the industry is at the bottom of the boom and competition is intensifying, we appropriately lowered our 2024-2025 profit forecast and added the 2026 profit forecast. We expect net profit to be 0.108/0.243/0.293 billion yuan (the previous value of 2024-2025 was 0.567/0.815 billion yuan), -66.8%/+125.6%/+20.6%; corresponding to the current stock price PE 99.6/44.1/36.6 times. As policies strongly support the steady recovery of real estate, the post-cycle real estate industry is expected to benefit, increase in performance can be expected, and maintain a “buy” rating.

Gross margin was stable, and the size of accounts receivable decreased slightly

2024 Q1-Q3 gross profit margin was 31.3%, -0.27pct year on year; 2024Q3 gross profit margin was 31.37%, -0.54 pct month-on-month.

Q1-Q3 gross margin remained stable, benefiting from an upward trend in overseas business; Q3 gross margin declined slightly month-on-month, mainly due to a slight decrease in sales prices for some products. The company's total expense ratio for Q1-Q3 2024 was 27.38%, +1.38pct year on year, of which the sales/management/ development/ finance ratio was 16.77%/6.13%/4.19%/0.28%, +0.29pct/+0.43pct/-0.11pct, respectively. The company's accounts receivable at the end of the third quarter were 3.907 billion yuan, +10.12% compared to the beginning of the year, and -8.58% of the scale of accounts receivable compared to the same period last year. The company's Q1-Q3 credit impairment losses were -0.12 billion yuan, +72.05% YoY. Net operating cash flow for Q1-Q3 2024 was 0.011 billion yuan, +0.108 billion yuan year over year, and 93.56% revenue ratio.

Actively expand emerging high-growth regions such as the Middle East and Africa, and can be expected to continue to increase in overseas share

Overseas performance continued to grow in Q1-Q3 of 2024. The overseas market sector (including Portugal) grew by more than 10%. Excluding Portuguese companies, the overseas performance of self-operated channels increased by about 18% in the third quarter. By region, India grew by more than 20%, the Middle East and Europe grew by more than 40%, and Africa, Malaysia, and Mexico grew by nearly 80%. The company's overseas business is connected to the domestic use of the same information technology systems, and increased localized operations. It plans to continue to develop new overseas products to meet the business expansion of more new scenarios in overseas markets. As of 2024H1, the share of overseas revenue has reached 11.37%. The company's overseas market layout has been actively adjusted for many years. The overseas market is expected to show a low and high trend throughout the year, and the increase can be expected.

Risk warning: the risk of rising raw material prices; the growth rate of demand in the construction hardware market is slowing down; the risk of capacity expansion falling short of expectations.