Core views

[Incident] The company disclosed 24Q3 financial reports: 24Q3 achieved operating income of 3.294 billion yuan (yoy +4.30%), net profit of 1.475 billion yuan (yoy +7.59%), net profit of 1.344 billion yuan (yoy +4.54%); achieved revenue of 9.261 billion yuan (yoy +6.76%) from the beginning of the year to the end of the reporting period, net profit of 3.968 billion yuan (yoy +10.16%), net deducted Profit of 3.541 billion yuan (yoy +8.71%).

Q3 Revenue growth has slowed, and sales of consumer goods etc. have remained resilient. The company's 24Q3 revenue increased 4.30% year over year. The growth rate was slower than previous quarters, but it was still better than market performance. According to the National Bureau of Statistics, the year-on-year growth rate for 7/8/9 was 2.7%/2.1%/3.2%, respectively. According to CTR data, ad market publication spending in July/August increased by 3.3%/5.2% year over year, respectively. We judge that the company's revenue growth rate is relatively steady, mainly due to the advertising and marketing effects of the Olympic Games and the Mid-Autumn Festival. As the leading media, the company continues to be favored by advertisers in a challenging macro environment, such as consumer goods maintaining resilience in the company's advertising.

Investment income increases profits, so it is recommended to pay attention to the repayment situation. The 24Q3 company's gross margin was 68.19%, which is basically the same as the same period last year. The sales expense ratio increased 1.24ppt to 18.99% year over year, and the management expense ratio increased 0.73 ppt to 4.01% year over year. 24Q3's other income and investment income were 0.126 billion yuan and 244 million yuan respectively, accounting for 11.24% of total revenue. In addition, due to the impact of the macro environment, the advertiser's account period was slightly extended. As of September 30, accounts receivable were 2.571 billion yuan (1.821 billion yuan at the end of 23), and 24Q3 companies accrued credit impairment losses of 0.089 billion yuan, accounting for about 2.69% of total revenue. The number of accounts receivable turnover days for the first three quarters of 24 was extended to 64 days. It is recommended to pay attention to subsequent repayments.

Optimistic about the core competitiveness of the Chinese media, as well as the expansion of overseas and sinking markets. We are optimistic about the differentiated mentality of the company's ladder media. We expect Q4 to usher in a new wave of sales peaks at points such as Double 11 and year-end promotions. Furthermore, cooperation between Fanzhong and Meituan in sinking cities is expected to open up online and offline marketing channels, better serve small and medium-sized advertisers represented by local lifestyle services, and increase their respective penetration rates in low-tier cities. Overseas, the company's overseas media network has covered 100 major cities such as South Korea, Thailand, Singapore, India, and Japan, covering more than 0.175 million screen terminals.

Profit forecasting and investment advice

We slightly adjusted our previous forecast. The company's net profit for 24-26 was 5.229/5.664/6.041 billion yuan (previous value was 5.255/5.699/6.086 billion yuan), and the corresponding EPS was 0.36/0.39/0.42 yuan. Maintain 21 times PE given in 24 years, target price 7.60 yuan/share, and maintain the “buy” rating.

Risk Warning: AI applications fall short of expectations; consumer goods advertisers are less willing to launch