Incident: The company announced its three-quarter report. The first three quarters of 2024 achieved revenue of 3.521 billion yuan, a year-on-year decrease of 3.40%; net profit to mother was 0.335 billion yuan, a year-on-year decrease of 33.66%; and a decrease of 36.65% after deduction.

The increase in equity incentive fees+exchange gains and losses+management expenses dragged down the company's performance in the third quarter. According to the company's three-quarter report, Q3 achieved revenue of 1.256 billion yuan, a year-on-year decrease of 9.76%; net profit to mother of 0.146 billion yuan, a year-on-year decrease of 32.85%; 0.14 billion yuan after deduction, a year-on-year decrease of 33.92%; gross margin of 38.98%, a year-on-year decrease of 1.85 percentage points; and net interest rate of 12.09%, a year-on-year decrease of 4.60 percentage points. The main reasons for the decline in net profit attributable to mother: 1) the company's equity incentive expenses increased by about 0.06 billion yuan over the same period; 2) financial expenses increased by 0.031 billion yuan over the same period due to exchange gains and losses; 3) human resources costs in management expenses increased by 0.023 billion yuan over the same period.

Domestic commercial alarm and evacuation services are the main reason for the decline in performance, and overseas and other businesses are growing steadily. By business: 1) The domestic commercial alarm and evacuation business achieved revenue of 2.334 billion yuan, a year-on-year decrease of 10.22%; the decline was mainly affected by two factors: first, the completed area of real estate fell 24.40% year on year; second, short-term inventory clean-up pressure due to updates to national standards for major products in the industry. Two factors led to increased market price competition. 2) The fire alarm business and intelligent evacuation business in the industrial/industrial sector grew steadily. Among them, the “Blue Bird” brand industrial project delivery volume was 0.38 billion yuan, an increase of 67% over the previous year. 3) The domestic fire fighting business achieved revenue of 0.359 billion yuan, a rapid increase of 13.22% over the same period last year. 4) Overall revenue from overseas markets was 0.526 billion, an increase of 14.03% over the same period last year.

Increase the dividend ratio+cancellation of shares repurchased in June+cancellation of shares repurchased again in September, giving full attention to shareholders' returns and demonstrating the company's confidence. 1) According to the company's 2023 equity distribution implementation announcement, a cash dividend of RMB 3.5 (tax included) was distributed to all shareholders, increasing the dividend rate from 30% in 2022 to 40%; 2) In June 2024, the company announced that it would cancel the 0.015 billion shares repurchased (1.94% of the company's total share capital before cancellation). 3) In November 2024, the company announced its intention to cancel the repurchased 0.01 billion shares (1.28% of the company's total share capital before cancellation), focusing on shareholder returns and demonstrating the company's confidence.

Profit forecast: Considering real estate sentiment and company orders, we adjusted the company's EPS for 2024-2026 to 0.65, 0.88, and 1.10 yuan, respectively, and PE to 16, 12, and 9 times, respectively, to maintain a “buy” rating.

Risk warning: Downstream customer sentiment affects orders, deteriorating competitive landscape, impact on raw material costs, etc.