The company released its 2024 three-quarter report: 24Q3 achieved revenue of 4.217 billion yuan (+5.0% YoY), net profit of 1.025 billion yuan (YoY +3.4%), net profit of 0.936 billion yuan (YoY) after deducting non-return net profit of 0.936 billion yuan (YoY -2.2%), which was affected by weak consumption and a slight decline in revenue growth; raw material costs increased, but profits remained stable thanks to actions such as improving supply chain capacity and product structure upgrades.

The superior products remained stable, and the growth of new segmented products was impressive. We judge that the growth rate of various sectors in 24Q3 has declined sequentially, and that converters continue to innovate and raise prices. We judge that 24Q3's converter business sales have remained stable, the average price has increased by a small number of digits, and the share of high-value and technology-sensitive products has increased. It is expected that explosive products such as track plugs and small cabins will continue to grow at an impressive rate; the share of wall openings will continue to rise against the trend. We judge that the 24Q3 wall revenue growth rate is higher by about an order of magnitude. Among them, the sales volume growth rate is faster, and the average price is declining slightly (mainly due to the cost effectiveness of the product); The impact of the industry is expected to be under pressure in the short term. Among them, stores without headlights are expected to be effective The improvement went smoothly; new products such as power tools and leafless fan lamps 24Q3 are expected to achieve breakthrough growth.

Independent brands went overseas smoothly, and the environment was weak, and they thought positively. We judge that the new energy business 24Q3 continues to expand rapidly. Europe and the US are actively promoting the launch of new energy products, mainly traditional products such as overseas converters in Southeast Asia. Currently, the local distribution system layout has been initially completed, and various new products such as flexible one-turn, unbreakable sockets, and integrated male and female plugs have been developed and launched. Under continuous pressure from real estate, the company achieved contrarian growth through active channel transformation and marketing style upgrades. We expect all categories of flagship store channels to be built smoothly and the current store operation quality will be gradually consolidated. The total sales volume of the Autumn Home Improvement Festival (September 15 to October 20) was 0.623 billion yuan, +131% compared to the Spring Home Improvement Festival, with a customer order value of 2,520 yuan, accounting for 5% of the total sales rate, including the total sales volume of the flagship store was 0.19 billion yuan, accounting for 3281% of the total sales volume. 80 yuan, single With a rate of 20%, it has achieved remarkable results in creating a “one-stop shopping” strategy.

Profitability declined slightly, and operating capacity was healthy. 24Q3 gross profit margin was 43.5% (YoY -1.2pct), net profit margin 24.3% (YoY -0.4pct). Higher raw material costs reduced gross profit margins, but thanks to improved supply chain capacity and product structure upgrades, etc., net interest rates remained stable. The 24Q3 sales/management/ R&D expense rates were 9.2%/4.3%/3.6% respectively (+2.7pct/-0.1pct/-0.1pct compared to the same period), which is expected to be mainly due to an increase in marketing investment. The net operating cash flow for 24Q3 was 0.654 billion yuan (-0.387 billion yuan year on year), and the number of inventory/receivable/payable turnover days was 52/6/78 days (+4/+1/+3 days year on year), respectively, and the operating capacity was stable.

Profit forecast and investment rating: We expect the company's net profit to be 4.36/4.76/5.19 billion yuan in 2024-2026, respectively, and the corresponding PE is 22X/20X/18X, respectively, maintaining a “buy” rating.

Risk warning: raw material prices fluctuate, business development falls short of expectations, terminal demand fluctuates.