2024Q3 Company's operating income/ net profit attributable to mother/ net profit excluding non-attributable net profit were 7.399/3.566/3.57 billion yuan (YoY +0.67%/+2.58%/+3.52%), respectively, and (revenue + delta contract liabilities) -7.96% YoY. Mid-range and high-end price performance was relatively high. The profit side was stable, cash flow increased year-on-year, advance receipt increased month-on-month, and the payback side actively reduced the burden.

In 24Q3, the middle and high-end price performance was relatively high, and the profit side showed steady performance. We expect 24Q3's mid-range price segment to continue its relatively good performance. In 24Q3, the company's gross margin/net margin changed year-on-year by -0.52/+0.79 percentage points to 88.12%/48.13%, and a slight decrease in the expense ratio boosted net interest rate performance:

The company's sales expense rate/ management expense ratio changed year-on-year in 24Q3 -1.08/ -0.56 percentage points to 11.76%/4.45%.

Operating cash flow performance improved, and reservoirs improved month-on-month. The 24Q3 company's operating cash flow was 4.24 billion yuan (+24.52% year over year); 24Q3 company contract liabilities and other current liabilities changed by -3.47/+0.353 billion yuan to 2.999 billion yuan, respectively; 24Q3's sales revenue was 8.107 billion yuan (-19.42% year over year). Based on maintaining channel health, the company takes the initiative to reduce channel burden & prioritize price stability, reflecting the company's belief in focusing on long-term healthy development.

Profit forecast: We anticipate that 24Q4 will continue to reduce the burden and prepare for the company's 25 young clothes to enter the market. Based on the company's concept of healthy long-term development while actively promoting sales and solving channel problems, we expect subsequent performance to enter a healthy growth channel. We expect 24-26 revenue to +9%/+8%/+11% to 32.9/35.5/39.4 billion yuan (previous value was 35/39.4/43.9 billion yuan), net profit to mother +8%/+9%/+12% to 14.2/15.5/17.4 billion yuan (previous value was 15.3/17.4/19.6 billion yuan). The profit forecast is mainly due to the industry being in the inventory removal cycle, and sales are relatively slow. The corresponding PE is 14X/ 13X/12X, maintaining a “buy” rating.

Risk warning: weak consumption; changes in industry policies; increased industry competition; sales of high-end products fall short of expectations.