Incident: Mrs. Good released the 2024 three-quarter report. 24Q1-3 achieved operating income of 1.069 billion yuan, a year-on-year decrease of 4.22%; net profit to mother of 0.19 billion yuan, a year-on-year decrease of 20.10%; net profit after deducting 0.19 billion yuan, a year-on-year decrease of 17.14%. 24Q3 achieved operating income of 0.356 billion yuan, a year-on-year decrease of 10.29%; net profit to mother was 0.047 billion yuan, a year-on-year decrease of 46.76%; net profit after deduction was 0.047 billion yuan, a year-on-year decrease of 41.54%.

Smart homes are still under pressure. Actively promoting trade-in is expected to stimulate online demand. The economic situation in the first three quarters was severe, consumer confidence was insufficient, the operating pressure on the real economy exceeded expectations, and the company's operations were under slight pressure in the short term. By product, smart products account for more than 85% of sales. By channel, the share of online channel sales revenue and sales volume is still higher than that of offline channels. The company responds positively to the “trade-in” policy. Currently, online channels are progressing rapidly, mainly due to convenient government communication and platform support. Among them, Tmall and JD have already received subsidies, and Douyin and Pinduoduo have yet to be integrated. There are various subsidy standards and conditions for offline channels, and the company is actively trying to open up internal chains and empower offline stores.

Gross margin was under pressure in the short term, and the net margin before major promotion expenses declined. In terms of profitability, 24Q1-3's gross margin was 52.73%, up 2.24pct year on year; 24Q3 company's gross margin was 49.33%, down 3.44pct year on year. 24Q3's gross margin was under slight pressure. Our analysis was mainly based on 1) the rise in bulk material prices; 2) the average price of new products was higher last year, and the main sales price declined this year under pressure from the consumer environment.

In terms of period expenses, the 24Q1-3 company's expenses rate for the period was 33.35%, up 7.21pct year on year. Sales/management/R&D/finance expenses rates were 24.52%/6.16%/3.57%/-0.89%, respectively, and +5.76/+1.13/+0.73/-0.40pct, respectively. The 24Q3 company's expense ratio was 36.16%, up 9.57pct year on year, and the sales/management/R&D/finance expenses ratio was 27.01%/5.97%/3.84%/-0.65%, respectively, +7.16/+1.41/+1.05/-0.04pct, respectively.

Under the combined influence, the net interest rate of the 24Q1-3 company was 17.79%, down 3.54 pct year on year; the net interest rate of the 24Q3 company was 13.15%, down 8.99 pct year on year.

Investment suggestion: Good Wife continues to build the core competitiveness of smart homes with leading technology to further enrich the whole house smart product package. With the continuous construction of the provincial operating platform, the accelerated expansion of online channels, and the optimization of the engineering channel structure, the company is expected to achieve steady growth. We expect Good Wife's 2024-2026 revenue to be 1.684, 1.988, 2.344 billion yuan, up -0.24%, 18.03%, and 17.91% year on year; net profit to mother will be 0.284, 0.349, 0.399 billion yuan, up -13.16%, 22.92%, and 14.07% year over year, corresponding PE of 20.0x, 16.2x, 14.2x, for 24 years 24xPE, corresponding target price of 16.87 yuan for purchase -A investment ratings.

Risk warning: Risks such as increased competition in the industry, falling short of expectations in household demand, and falling short of expectations in the penetration rate of smart homes such as smart clothes hangers.