Introduction to this report:

The performance is in line with expectations, maintains profit forecasts, and maintains a high dividend strategy. The current stock price corresponds to 2024 PE 18X, maintaining an increase rating.

Key points of investment:

Investment advice: The performance is in line with expectations, maintaining the 2024/25/26 EPS forecast of 0.89/0.98/1.03 yuan. Considering the macroeconomic recovery forecast catalyzes valuation, refer to comparable company valuations, and raise the target price to 22.07 yuan. The target price corresponds to 2024 PE 25X.

The performance was in line with expectations: the company achieved revenue of 1.023 billion yuan in 3Q24, -4.61% year on year, net profit to mother 0.151 billion yuan, -6.78% year-on-year, after deducting non-return net profit of 0.139 billion yuan, or -8.18% year on year.

Month-on-month improvement in profitability: 3Q24's gross profit margin was 28.54%, -0.63pct year on year, but improved from 2Q24 (2Q24 27.59%); 3Q24 single quarter sales expense ratio 5.04%, year-on-year -0.41pct, month-on-month contraction (2Q24 4.96%); 3Q24 single quarter net profit margin of 13.57%, year-on-year, -0.53 pct year on year, but there was an increase (2Q24 12.82%).

Single store decline and store openings remain flat: According to our estimates, we expect the number of units in the 3Q24 single store decline. The number of stores opened is basically the same as the number of stores closed. The growth rate of the number of stores is expected to remain about the same as the same as the number of stores closed.

We expect a low unit decline in revenue for the full year of 2024, and a significant year-on-year improvement in 4Q24 profit.

Risk warning: macroeconomic factors, fluctuating raw material costs.