Event: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 286.329 billion yuan, a year-on-year decrease of 28.55%; realized net profit to mother of 0.712 billion yuan, a year-on-year decrease of 61.83%; and realized net profit without deduction of -0.726 billion yuan, changing from profit to loss year-on-year. With 2024Q3, the company achieved revenue of 91.118 billion yuan in a single quarter, a year-on-year decrease of 29.26% and a decrease of 7.33% month-on-month; realized net profit to mother of -0.127 billion yuan, all of which changed from profit to loss over the same period last year.

Comment:

Commodity prices fell, gross margin declined, and 24Q3 company performance was under pressure. Since 2024, the company's overall supply chain management business volume has declined by optimizing its business structure and focusing on high-quality business. Entering 2024Q3, commodity prices fell again, and demand for superimposed terminals was still weak, causing the company's profitability to decline. According to iFind data, the 2024Q3 domestic commodity price index fell 1.9% month-on-month, with steel, energy, non-ferrous, and agricultural commodities falling 9.7%, 4.2%, 3.5%, and 2.4%, respectively. 2024Q3, the company's gross margin in a single quarter was 0.61%, down 0.74 pct year on year and 1.32 pct month on month. In terms of expenses, 2024Q3's sales and R&D expenses decreased by 10.8% and 9.5%, respectively, and management and financial expenses increased by 35.4% and 31.0%, respectively. Among them, we believe that the increase in the company's financial expenses is mainly due to exchange losses caused by exchange rate fluctuations.

Expand the supply chain management business layout in both directions, and open up a new growth track for the health technology business. In terms of supply chain management business, the company cooperates with upstream and downstream enterprises in the main resource products industry chain through long-term cooperation and the establishment of joint ventures, etc., to effectively ensure the stability of raw material supply and sales of finished products in the corresponding industries. In addition, the company will horizontally expand its new energy supply chain management business during 2023, opening up new revenue streams for the company. In terms of health technology business, in 2023, the company acquired Paiter Healthcare, a leading provider of integrated solutions for minimally invasive surgery in China, and further promoted investment, mergers, acquisitions and joint ventures in the field of minimally invasive medical care.

In the first half of 2024, the company's health technology business revenue increased by 91.4% year on year, and the gross margin of the corresponding business increased by 33.9 pct year on year.

Profit forecast, valuation and rating: 24Q3 Due to insufficient effective terminal demand, commodity prices fell, and the company's gross margin fell in a single quarter, putting pressure on the company's performance. Considering that terminal demand still needs to be repaired, we lowered the company's profit forecast for 2024-2026. We expect the company's net profit to be 1.309/2.167/2.603 billion yuan in 2024-2026 (previous values were 2.039/2.438/2.908 billion yuan, respectively). The company is one of the leading enterprises in the domestic supply chain management industry. With the gradual restoration of terminal demand and the continuous optimization of the company's supply chain business structure, the company's profitability is expected to continue to improve and maintain the company's “buy” rating.

Risk warning: commodity price changes, macroeconomic downside risk, accounts receivable risk, terminal demand falling short of expectations, risk of exchange rate fluctuations, and progress in new business development falling short of expectations.