The company released a three-quarter report: Q3 achieved revenue of 0.521 billion yuan (yoy -20.43%) and net profit to mother of 46.1 million yuan (yoy -50.79%). 24Q1-3 achieved revenue of 1.444 billion yuan (yoy -11.24%) and net profit of 90.966 million yuan (yoy -48.94%) to mother. There was a decline in the company's Q3 revenue. We judge that it was mainly due to a decline in retail channel revenue due to weak terminal demand; Q3 profit performance was clearly weaker than revenue. We determined that the decline in revenue scale was mainly due to the weakening of the effects of the decline in revenue scale on rigid costs and cost dilution, and an increase in the amortization of incentive expenses. Under pressure from the industry, the company is actively promoting channel transformation. New channels such as bulk and packaging contribute structural highlights. Along with the expansion of the trade-in policy subsidy, the terminal retail channel is expected to be repaired. We expect the company's Q4 operations to improve and maintain a “buy” rating.

The Q3 retail channel is under pressure. Looking at the higher growth rate of the engineering channel & cabinet category, 24Q1-3 retail revenue also fell 18.0% to 1.169 billion yuan, of which Q3 single-quarter revenue -27.7% to 0.42 billion yuan; on the engineering side, 24Q1-3's bulk revenue also increased 72.0% to 0.209 billion yuan, of which Q3 single-quarter was +71.1% to 0.079 billion yuan. We determine that the main reason was that the company developed engineering business independently after the divestment of Qianchuan. Caused by pioneering development. By category, 24Q1-3 overall wardrobe and supporting furniture/cabinet/wooden door/ finished product supporting revenue was -14.8%/+11.8%/-2.7%/-14.1% to 10.33/0.226/0.058/0.062 billion yuan, and Q3 single quarter was -23.8%/+2.8%/-0.5%/-41.5% to 3.71/0.085/0.025/0.018 billion yuan, respectively. The cabinet business performance is excellent. We judge that it is mainly a large-scale business growth agency with rapid growth To you.

The gross sales margin also decreased by 1.79 pct in the first three quarters. The cost ratio increased year-on-year during the period 24Q1-3, and the gross sales margin also decreased by 1.79 pct to 34.68%. Among them, the gross margin for the Q3 single quarter also decreased by 3.32 pct to 34.05%. We judge that this is mainly due to the decline in revenue scale, the weakening of the effects of rigid costs and cost dilution, as well as the phased increase in terminal concessions. The cost ratio also increased by 2.89pct to 29.20% during the 24Q1-3 period, of which the sales expense ratio also increased by 1.08pct to 13.93%, mainly due to the decline in revenue and the weakening of the cost dilution effect; the management+R&D expense ratio increased by 1.68pct to 13.59%, mainly due to declining revenue and increased amortization of incentive expenses; and the financial expense ratio also increased by 0.13 pct to 1.68%. Under the combined influence, the company's 24Q1-3 net sales margin fell 4.65pct year on year to 6.30%.

Profit forecasting and valuation

Based on the company's Q3 performance, considering that demand has yet to recover, we lowered our retail revenue forecast. The net profit for 24-26 is 0.154/0.17/0.186 billion yuan respectively (previous value was 0.204/0.226/0.245 billion yuan), and the corresponding EPS is 0.50/0.55/0.60 yuan, respectively. Referring to the 25-year Wind of comparable companies, the average PE value is 14 times higher. Considering the company's focus on endogenous growth, the household strategy is progressing steadily, channels and categories There is considerable room for expansion. The company was given 19 times PE in 25 years, the target price was 10.45 yuan (previous value: 8.58 yuan), and maintained a “buy” rating.

Risk warning: Demand recovery fell short of expectations, real estate sales declined, and channel expansion fell short of expectations.