Incident: The company's 3Q2024 revenue was 0.472 billion yuan, -1.17%; net profit to mother was 0.022 billion yuan, or -42.08% YoY; net profit after deducting non-attributable net profit of 0.023 billion yuan, -23.54% YoY.

Revenue side: Little B has recovered, while Big B is still under pressure. The third quarter is the company's traditional low season, and revenue is slower than in the first half of the year. We believe: 1) Big B customers have a high base in 3Q2023; 2) Small B channels have grown. On the one hand, the company has increased its market investment, and on the other hand, it continues to cultivate deeply through new products and channel refinement.

Profit side: Gross margin has remained stable, and cost investment has increased. The gross margin of 3Q2024 was 22.44%, +0.04pct compared to the previous year. The overall gross margin was stable. Although the company discounted prices for downstream customers, cost improvements could hedge against this impact. Sales/management/R&D/finance rates are +0.81/+1.19/+0.15/-0.41pct. Expenses are mainly invested on the small B-side. The company collaborates with dealers in core categories to actively compete in the market to help dealers expand channels and cultivate the market. The 4Q2024 peak season will continue to invest in expenses. At the same time, the company continues to maintain high investment in R&D and is building up for growth in the coming year. The 3Q2024 net interest rate was 4.68%, -3.30pct year on year, mainly related to the reduction in government subsidies.

New products are expected to be released, and the number of key customers will increase. The company received positive feedback on product reserves and promotion in the third quarter. The contribution of new products is expected to gradually show in the fourth quarter, and next year will be reaped. In terms of key customers, 3Q2024 is strengthening cooperation with major customers and is expected to contribute positively in the future.

Investment advice: We expect the company to achieve revenue of 1.975/2.24/2.51 billion yuan in 2024-2026, +3.93%/+13.39%/+12.07%, and achieve net profit of 0.115/0.142/0.168 billion yuan, year-on-year, -14.11%/+22.77%/+18.39%, EPS of 1.16/1.43/1.69 yuan, and corresponding PE of 26.04/21.21/17.91, respectively. Maintain the company's “buy” rating.

Risk warning: Industry competition increases risks; food safety risks; raw material price fluctuations and other risks.