occurrences

The first three quarters of 2024 achieved revenue of 12.603 billion, +8.58% YoY, net profit to mother of 3.263 billion, +16.00% YoY, after deducting non-net profit of 2.839 billion, +8.26% YoY. The third quarter achieved revenue of 4.217 billion, +5.04% year on year, net profit of 1.025 billion yuan, +3.36% year on year, after deducting non-net profit of 0.936 billion, or -2.21% year on year.

Industry demand weakens, and revenue continues to grow

24Q3's revenue was +5% year-on-year, with a slight decline from month to month. Considering the weak industry, revenue was in line with market expectations.

Among them, we expect 24Q3's new energy to continue to grow rapidly; electric connectivity is expected to grow slightly; smart electrical lighting is expected to grow in single digits; the smart ecological category is expected to grow in single digits; overall, in addition to maintaining high growth in the new energy business, the electric connectivity and smart electrical lighting business will slow down.

Maintaining high investment costs and putting pressure on operating margins

The 24Q3 company's gross margin was -1.2pct year-on-year, mainly due to the rise in copper prices in the previous period. The cost rate was +2.6 pct year on year, the management/R&D/finance cost ratio was stable, while the sales cost ratio was +2.7 pct year over year. The main reason was that channel construction had entered a new stage and the construction of new retail and flagship stores accelerated. In addition, the 24Q3 increase in the company's other income/ increase in net investment income (wealth management income)/decrease in credit impairment losses, decrease in non-operating expenses (with donations last year), and decrease in income tax expenses contributed 0.4/0.4/1.1/0.5pct, respectively. Overall, the company's net interest rate to mother is basically stable.

The company's alpha attributes are prominent, and it is optimistic about long-term steady management

Despite the company's revenue deceleration, it is not easy to maintain steady growth in view of the weak real estate demand environment. We have long been optimistic about the steady nature of the company's operations; on the one hand, the cornerstone business — demand for converters is stable; on the other hand, the company has strong operating strength, maintains efficient promotion of traditional categories and explores consumer demand; in addition, actively expand the contribution of new categories. In the short term, considering that the home appliances and household categories are driven by beneficial policies, demand for related home decoration categories is also expected to be driven, and the company's subsequent revenue is also expected to improve month-on-month.

Maintaining the company's “buy” rating

24Q3 Bulls' revenue achieved single-digit growth. Combined with a weak demand environment, it was not easy; although gross margin was under pressure and expense ratios increased, other earnings increased, and the company's profitability remained stable. Looking ahead, we believe that Bull Group's comprehensive competitive strength is outstanding, the strategy is clear, and it is expected that it will continue to maintain steady operation in the long term. The company's 24-26 performance is expected to be +13%/+8%/+12%, respectively, corresponding to the current valuation of 22X/20X/18X, maintaining a buying rating.

Risk warning: 1. The downward pressure on demand for new home renovation exceeded expectations; 2. New business development fell short of expectations.