incident. The company released its 2024 three-quarter report: 24Q1-3 achieved total revenue of 9.942 billion yuan, +18.8% year over year, net profit to mother of 3.086 billion yuan, +17.1% year over year; of these, the 24Q3 single quarter company achieved total operating income of 2.637 billion yuan, +10.1% year over year, and net profit of 0.624 billion yuan year on year, +6.6% year over year.

Special A+ has maintained double-digit growth, and the product structure continues to improve. By product: 24Q3 special A+ product revenue was +11.7%. We believe or benefit from good sales of K-series upgrades and V3 products, with special A+ revenue accounting for +0.98pct to 68.8% year over year; special A revenue was +9.6% year-on-year, which we think may be related to the continuation of the elegant and stand-alone trend. 24Q3 Class A/Class B/Class C+D product revenue was +7.7%/-11.9%/-17.8%, respectively.

Markets outside the province performed well, and the channel layout continued to expand. By region: The company's precise measures promoted breakthroughs outside the province. Revenue from outside the province continued to rise high in 24Q3, +23.0% to 0.204 billion yuan over the same period last year. The provincial market continued to grow, with revenue of +9.3% year-on-year in 24Q3. Among them, the Suzhong/Huai'an market performed better than the whole, with +12.9%/+10.1% year-on-year, respectively, while the revenue from the Nanjing/Sunan/Yancheng/Huaihai market was +8.1%/+8.2%/+9.0%/+6.7%, respectively. The dealer network continued to expand, with a net increase of 143 to 1193 dealers in 24Q3, with an increase of 54/89 in the province/outside the province respectively.

The increase in trade-off is dragging down gross profit, and cash flow performance is under pressure. The 24Q3 company's gross margin was -5.14 pct to 75.6% year on year, which we think may be related to increased trade-off strength; the sales expense ratio was -3.90 pct to 20.6% year over year, and the gross sales margin was -1.24 pct to 55.0% year over year. The increase in fair value change earnings hedged the decline in profit, with a net year-on-year increase of 0.018 billion yuan to 0.017 billion yuan, and the net profit margin for 24Q3 -0.78 pct year on year was -0.78 pct to 23.7% year on year. Cash flow was under pressure. 24Q3 sales payback/net operating cash flow was -1.8%/-16.9%, respectively.

Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 2.88, 3.31, and 3.73 yuan/share, respectively. Referring to comparable company valuations, we gave the company 20-25 times PE in 2024, with a corresponding reasonable value range of 57.60-72.01 yuan, maintaining a “superior to the market” rating.

Risk warning. Competition in the provincial market intensified, and expansion outside the province fell short of expectations.