The company's 1-3Q2024 revenue decreased 8.31% year on year, and net profit to mother increased 366.88% year on year

The company announced its 2024 three-quarter report: 1-3Q2024 achieved operating income of 21.617 billion yuan, a year-on-year decrease of 8.31%, realized a net profit of 1.62 billion yuan, a year-on-year increase of 366.88%, and realized net profit deducted from non-mother of 0.158 billion yuan, a year-on-year decrease of 45.25%. Among them, the company's investment income for the first three quarters was 1.903 billion.

Looking at the single-quarter split, 3Q2024 achieved operating income of 6.444 billion yuan, a year-on-year decrease of 10.91%, and realized net profit of 1.345 billion yuan, compared to 0.014 billion yuan in the same period last year. Net profit after deduction of non-return to mother was -0.043 billion yuan, compared to 0.004 billion yuan in the same period last year.

The company's 1-3Q2024 comprehensive gross margin decreased by 1.15 percentage points, and the expense ratio increased by 0.25 percentage points during the period

1-3Q2024's consolidated gross margin was 25.38%, down 1.15 percentage points year over year. Looking at the single-quarter split, the 3Q2024 company's comprehensive gross margin was 24.99%, down 1.44 percentage points from the previous year.

The 1-3Q2024 company's expense ratio for the period was 23.55%, up 0.25 percentage points year on year. Among them, sales/management/finance/R&D expenses were 16.06%/7.44%/0.02%/0.03%, respectively, with year-on-year changes of -0.08/ +0.32/+0.04/-0.03 percentage points, respectively. The 3Q2024 company's expense ratio for the period was 26.81%, up 1.86 percentage points year on year. Among them, sales/management/finance/R&D expenses were 18.27%/8.47%/0.04%/0.03%, respectively, with a year-on-year change of +0.88/ +0.88/ +0.13/ -0.03 percentage points, respectively.

Issuing Huaan Bailian Consumer REIT to strengthen supply chain management

3Q2024's high profit is mainly due to the company's issuance of Huaan Bailian Consumer REIT to obtain investment income. Huaan Bailian Consumer REIT was listed on the Shanghai Stock Exchange on August 16, 2024. The final fund share raised 1 billion shares. The sale price was 2.332 yuan/share, and the net capital raised by the fund was 2.332 billion yuan. In 2024, the company will strengthen supply chain management and operation collaboration, introduce differentiated competitive first stores, plan launch events, and increase support for venues, membership, and promotion.

Adjust profit forecasts to maintain “buy” ratings

The company's performance exceeded our previous expectations, mainly because the company issued Huaan Bailian Consumer REIT to achieve a high return on investment. We raised our 2024 EPS forecast by 202% to 0.92 yuan. Considering that there is still some uncertainty about the future consumption recovery process and the intense offline retail competition in East China, we lowered our 2025/2026 EPS forecast by 21%/21% to 0.26/0.28 yuan. The company has a strong competitive advantage in Shanghai and other places, and maintains a “buy” rating.

Risk warning: The consumption recovery process fell short of expectations, and the operation of shopping centers fell short of expectations after renovation.