Introduction to this report:

The main business cycle shows operational resilience, and emerging businesses maintain a high growth rate; due to raw materials, gross margins have declined slightly, and sales expenses have operated at a high level. Increase your holdings.

Key points of investment:

Investment advice: The company's main business has shown operational resilience through the cycle, and emerging businesses maintain a high growth rate.

Considering that the company's main business is still affected by the real estate side in the short term, and the sales expense ratio is relatively high, we lowered our profit forecast. The company's EPS for 2024-2026 is 3.37/3.82/4.14 yuan (original value 3.57/4.23/4.77 yuan, margin -6%/-10%/-13%), +12.5%/+13.3%/+8.4% compared to the same period last year. Referring to the same industry, we gave the company 27xPE in 2024, lowered the target price to 90.99 yuan, and maintained the “gain” rating.

The company's 2024Q3 results fell slightly short of expectations. In the first three quarters of 2024, the company achieved operating income of 12.603 billion yuan, net profit of 3.263 billion yuan year-on-year, +16% year-on-year, net profit of 2.839 billion yuan, +8.26% year-on-year; of these, 2024Q3 achieved operating income of 4.217 billion yuan, +5.04% year-on-year, and net profit of 1.025 billion yuan year-on-year, +3.36% year-on-year, net profit of non-return to mother of 0.936 billion yuan , -2.21% YoY.

The main business has shown operational resilience through the cycle, and emerging businesses have maintained a high growth rate. The company was driven by pressure on the completion side of real estate, which was reflected in Q3 2024. With the company's layout of millions of outlets on the C-side and support for emerging businesses, it still showed operational resilience. Looking at the breakdown: 1) Affected by the weak consumption environment, the growth rate of the electric connection business is expected to narrow to about 2% to 3%. Among them, the power tool business is expected to accelerate, and the revenue contribution has now reached tens of millions. 2) The smart electrical lighting business is more related to real estate. Among them, the growth rate of the wall opening business is expected to narrow to the middle single digit; the LED lighting business is under the most obvious pressure, and the growth rate is expected to narrow to the middle digits; the headlightless business is growing steadily. It is estimated that the total revenue contribution of the Bull brand and Muguang brand's unheadlamp business is about tens of millions of yuan. 3) In the new energy business, the domestic charging business maintains the largest share of the total online and offline market; overseas energy storage businesses in Europe have a clear direction and are expected to generate revenue contributions within 2024. The overall growth trend is expected to double.

Due to raw materials, gross margin decreased slightly, and sales expenses were operating at a high level. The gross margin of 2024Q3 is 43.47%. It is expected that due to high prices of raw materials such as copper, gross margin will drop slightly by 1.18 pct year on year; net margin will be 24.31%, -0.37 pct year on year. The 2024Q3 sales cost rate remains high. It is expected that with the expansion of the company's overseas channels, domestic channels without headlights, and the expansion of B-side operation channels for new energy vehicles, the company's sales rate will continue to increase slightly.

Risk warning: raw material prices fluctuate, industry competition intensifies, and overseas market expansion falls short of expectations.