The company released a three-quarter report

The company's 24Q3 revenue of 1.88 billion decreased by 38%, due to fluctuations in the economic environment, the phased reduction in shopping mall occupancy rates. The company's revenue decreased year-on-year due to a reduction in the number of projects in other business sectors and a slowdown in progress; the company's 24Q3 net profit to the mother was -0.6 billion, and 24Q3 net profit was reduced by -0.5 billion; 24Q1-3's revenue of 6.1 billion was reduced by 30%, of which the company had already opened its own shopping mall Earned revenue of 4.3 billion, a decrease of 19%.

24Q1-3's net profit to its mother - -1.9 billion, is a year-on-year decline in the company's shopping mall rental rate. The company reduced part of the rent and management fees for eligible merchants, while the slow recovery in the real estate-related industry led to a decrease in new projects in the company's management business and construction related business, and a slowdown in stock projects. This combined led to a year-on-year decrease in the company's operating income. Corresponsively, the fair value of investment properties declined.

Furthermore, for individual projects, the company estimates that the return rate of continued progress will be lower than expected. After evaluation by the relevant departments, the decision to stop continuing investment was made, and 24Q1-3 was confirmed as a loss of 24Q1-3, and the company withheld net profit of -1.1 billion yuan after deducting the invested costs as sunk costs.

The 24Q1-3 company's gross profit margin was 59.42%, an increase of 1.63pct. Among them, the gross profit margin of the company's own shopping malls was 70.2%, a decrease of 1.7 pct; the net profit margin of the 24Q1-3 company was -32.84%, a decrease of 25.67 pcts.

As of September 30, 2024, the company operated 84 self-operated shopping malls, 260 managed shopping malls with different management depths, and operated 7 home furnishing stores through strategic cooperation. In addition, the company authorized 48 home building materials projects through franchises, including a total of 430 home building materials stores/industrial streets.

Take the lead in implementing a new retail model for home consumption

The company and strategic investor Alibaba jointly explore the layout of the new home retail sector and take the lead in implementing a new retail model for home consumption. The company digitally upgraded shopping malls across the country, established an online “Tmall Tongcheng Station”, and built its own new retail online product operation and service capabilities. At the same time, the company supports traditional dealers to have the ability to operate online in various aspects such as product selection, digital transformation, and traffic acceptance, so as to accurately transform online traffic into offline shopping mall experiences and facilitate transactions in a timely and effective manner, empowering merchants while also bringing consumers a better home shopping experience.

Adjust profit forecasts and lower “hold” rating

Based on the macroeconomic situation, the decline in customer flow in home furnishing stores, and the reduction in the completion of new homes is dragging down demand; we adjusted the profit forecast. The company's net profit for 24-26 is -1.575 billion yuan, -0.192 billion yuan, and 0.189 billion yuan (original value was 0.001/0.21/0.41 billion yuan), and EPS was -0.36 yuan, -0.04 yuan, and 0.04 yuan, respectively (the original value was 0/0.05/0.09 yuan).

At the same time, we adjusted our profit forecast from “buy” to “hold”.

Risk warning: performance risk reduction; market competition risk; financial funding risk.