Key investment points

Revenue and profit rose steadily, and the number of sellers on the platform achieved a 10% year-on-year increase: 2024Q3's revenue was 0.416 billion yuan, up 8.50% year on year; net profit to mother was 0.124 billion yuan, up 14.88% year on year; net profit after deducting non-return to mother was 0.122 billion yuan, up 13.23% year on year. As of 2024Q3, the number of paid members on the Made in China platform reached 26,688, an increase of 934 over 2024H1, an increase of 3.63%; an increase of 2,424 over 2023Q3, an increase of 9.99%.

The results of cost reduction and efficiency were remarkable, and the company's profit flexibility continued to increase: Q3 company's gross margin reached 79.81%, up 116 bps year on year; sales expenses ratio was 32.93%, down 66 bps year on year; R&D expenses ratio was 7.93%, down 118 bps year on year; management expenses ratio was 8.17%, up 88 bps year on year. Overall, the company's gross margin continues to rise, and AI technology is driving the convergence of R&D expenses. Considering that the company's costs are mainly fixed costs, profit elasticity will be greatly unlocked in the future.

The management reform has been effective, and the platform's cash repayment speed has continued to improve: since July, the company has gone through a series of operational reforms and continued to improve efficiency in terms of organizational structure, sales training, etc. The company received 0.426 billion in cash from sales of goods and services in Q3, an increase of 12.72% over the previous year (the three-quarter report only had a consolidated reporting caliber, including all businesses; only the interim report and annual report were the parent company's reporting caliber, including only the Made in China business). The increase in the speed of the company's cash repayment will speed up revenue recognition in the statement, which is expected to drive an increase in the company's revenue growth rate next year.

Focus on refined operation and focus on improving the level of buyer user retention and monetization: The company continuously optimizes service levels, continuously improves buyer traffic retention and increases transaction frequency by improving product UI and opening AI auxiliary functions, which helps expand the monetization space for the company's business.

In the future, AI products outside the site will open up space: the company will release a new AI platform, which directly connects to e-commerce trading platforms such as Amazon, TEMU, and Alibaba. The internal AI agent gathers consulting service functions such as product selection and supply search, and can accelerate graphic processing and product updates with one click. Currently, there are no AI products using all platforms in the market. The company's new AI platform is expected to attract more off-site merchants, and the number of AI payments may increase dramatically.

Profit forecast and investment rating: We maintain our previous forecast. We expect the company's revenue for 2024-2026 to be 1.766/2.11/2.454 billion yuan, and net profit to mother of 0.504/0.661/0.784 billion yuan, respectively. The PE corresponding to the current price is 18.98/14.45/12.19 times. We believe that the company is an underrated digital economy platform leader. It is expected to benefit from the three major advantages of “technology enability+SaaS model+favorable policies”, usher in accelerated growth, and maintain a “buy” rating.

Risk warning: fluctuating market demand and changes in the international trade environment; cross-border operations and transactions; increased industry competition