Event: The company announced its results for the first three quarters of 2024: in the first three quarters, the company achieved revenue of 1.388 billion yuan, an increase of 2.6% year on year; net profit to mother of 41.82 million yuan, a year-on-year decrease of 24.36%. In the third quarter, the company achieved revenue of 0.483 billion yuan, a year-on-year increase of 3.67%; net profit to mother was 18.63 million yuan, a year-on-year decrease of 22.73%.

Fee control is relatively good, but demand pressure affected profit levels: in the third quarter, the company's gross margin was 8.90%, down 0.64pct from the previous year. We think it was mainly under pressure from last year's summer high base, and the operating data of medium- and high-end hotels were relatively under pressure. In terms of the cost ratio for the period, sales/management/finance expense ratios for the third quarter were +0.43/-1.38/-1.20pct, respectively, improving operational quality and efficiency. In the third quarter, the company's net interest rate to mother was 3.86%, down 1.32pct from the same period last year.

Cultural tourism was integrated and revitalized during the National Day, and brand building continued: Nanjing Jinling Hotel hosted 0.026 million guests during the National Day, with revenue exceeding 10 million yuan. Shanghai Jinling Zijinshan Hotel released more than 10 National Day-themed “Exclusive Jinling” products. Room occupancy rates and RevPAR reached new highs during the National Day. Suzhou Jinling Yadu Hotel launched the “Room+Scenic Area”, “Room+Afternoon Tea” and “Room+Small Banquet” package. The average occupancy rate was as high as 90%, and the average occupancy rate of rooms during the National Day holiday exceeded 10% in the same period last year. In the trade sector, Sugang continued to expand its sales pool in the fourth quarter, highlight key brands, take good care of sales of high-margin varieties, and speed up the clean-up of varieties that have been slow to sell for a long time. Gross profit margin is expected to pick up in the future.

Investment advice: The company is a national hotel brand with outstanding operational advantages in the middle and high-end full-service hotel sector. It is driven by two-wheel drive with brand operation and capital expansion. The hotel chain continues to expand, compounding the rapid growth of the commodity trade sector, and the potential for growth is visible in the context of deepening national reform. We expect the company's net profit to be 0.057/0.074/0.085 billion yuan in 2024-2026, respectively, with a corresponding PE of 48.02/37.08/32.03X, maintaining an “incremental” rating.

Risk warning: competition in the industry intensifies; the prepared food business falls short of expectations; store expansion falls short of expectations