Event: The company released its 2024 three-quarter report. In the first three quarters, the company achieved operating income of 70.6 billion yuan, +9% year-on-year, achieving net profit of 2.8 billion yuan, or +15% year-on-year; in 24Q3, the company achieved operating income of 21.9 billion yuan, flat year over year, and achieved net profit of 0.78 billion yuan to mother, -16% year over year. The overall performance was in line with market expectations.

Export sales surged and domestic sales decelerated in Q3. 1) Ice washing: According to Industry Online, the company's refrigerator sales volume was -6% year-on-year, and export sales were +22% year-on-year. The company's export competitiveness continues to increase, and structural upgrades have led to an increase in profits. 2) Home Air: According to Industry Online, domestic sales of household air conditioners were -15% year-on-year, and export sales were +43% year-on-year. The export sales of air conditioners maintained a high growth rate. 3) Central Airlines: According to Industry Online, the company's multi-online sales in July-August were -2% year-on-year. We estimate that domestic sales declined and export sales grew faster. Since 2024, the downturn in real estate has dragged down the company's multi-online revenue. In addition, the company's active inventory removal also had a certain impact. The company is operating steadily, and we estimate that the central bank sector has basically maintained last year's net interest rate. We value the company's medium- to long-term progress in category breakthroughs and market development. The company has achieved remarkable results in the relatively short field of engineering and construction, and the rapid layout of chillers and unit units.

The pressure on gross margin is mainly due to an increase in raw material prices+an increase in the share of export sales. The 24Q3 company achieved a gross profit margin of 20.8%, a year-on-year ratio of -2.4 pct. The main reason was the increase in raw material prices and an increase in the share of export sales. Furthermore, the company's active inventory removal affected gross profit to a certain extent. On the cost side, the 24Q3 company's sales, management, R&D, and financial expense ratios were -1.25/+0.68/+0.52pct, respectively. The overall cost rate remained stable during the period. The decline in sales expenses was mainly due to an increase in the share of export sales. The increase in financial expenses was due to a decrease in exchange benefits compared to the same period last year. In terms of R&D investment, the company adhered to the “technology enterprise” concept and further increased investment.

Investment advice: The third quarter rules for consumer goods trade-in activities supported by the domestic central financial administration have been implemented, and there is strong certainty that the company's performance is expected to improve in Q4. Short-term profits are under pressure without changing the long-term logic, and we are firmly optimistic about the company's growth. We expect the company's net profit to be 3.3/3.9/4.6 billion yuan in 2024-2026, up 17%/18%/17% respectively, corresponding to a valuation of 12/10/9 times, and maintain the “Highly Recommended” rating.

Risk warning: Prices of raw materials have risen sharply, real estate completion falls short of expectations, and trade-in falls short of expectations.