The company released three quarterly reports: 9M24 achieved revenue of 14.621 billion yuan, year-on-year net profit of -11.24%, net profit of 0.468 billion yuan, YoY -45.01%, 24Q3 achieved revenue of 5.324 billion yuan, -9.74% YoY, net profit to mother 0.124 billion yuan, 4.8.05% YoY, lower than our expectations (0.15 billion yuan), mainly due to increased competition and reduced profitability due to a sharp decline in gross margin. We believe that the company's new orders have continued to grow since 23Q2, which shows that the leading share of the industry has increased during the clean-up process. In the future, as the pattern stabilizes, the dominant position of the leader may become more stable and “increase” the rating.

24Q3 gross margin was under pressure, and the impact of cost rate optimization and impairment reduced 9M24's comprehensive gross margin was 12.93%, -2.11pct year over year, 11.64% gross margin for 24Q3, -2.63pct year-on-year, and -2.44pct month-on-month. The 9M24 company's cost rate for the period was 7.64%, -0.02pct year on year, and 7.22% for the 24Q3 period, -0.42pct year on year. Among them, the sales/management/R&D/finance expenses ratio was -0.12/+0.19/-0.57/+0.08pct year-on-year. 9M24 impairment expenses accounted for +0.01pct to 1.62% of revenue year over year, and 24Q3 -0.21pct year over year. Under the combined influence, 9M24's net profit margin was 3.20%, -1.97 pct year on year, 2.32% for 24Q3, -1.71 pct year on year, and -0.64 pct month on month.

Operating cash flow improved year-on-year in 24Q3, and the interest-bearing debt ratio decreased 9M24's net operating cash flow by -0.721 billion yuan, with a year-on-year increase of 0.23 billion yuan. The payment/payout ratio was 99.7%/96.2%, and +1.46/+0.21pct year over year. 24Q3 net operating cash flow was 0.469 billion yuan, with a year-on-year increase of 0.622 billion yuan. It was mainly due to a decrease in revenue while maintaining the repayment scale, but expenditure decreased by 0.69 billion yuan, the payment/payout ratio was 85.8%/74.4%, and +4.96/-8.52 pct year over year. Bills receivable and accounts/contract assets at the end of 24Q3 were 13.2/8.6 billion yuan, compared with -0.5/-0.5 billion yuan, increasing the impact of reducing repayment receivables.

9M24's new orders were +1.3% year over year, and has maintained positive growth for 6 consecutive quarters of 9M24's new orders of 18.69 billion yuan, or +1.3% year over year, of which public/residential/design ratio was +8.5%/-26.0%/-26.8%. Since 23Q2, the company's new orders have maintained positive growth for 6 consecutive quarters, reflecting the resilience of leading operations. The number of new orders signed in the 23Q2-24Q3 season was +36.6%/+14.8%/+4.3%/+0.6%/+1.8%/+1.5%, respectively. At the end of 24Q3, the company had signed a total of 23.7 billion yuan of unfinished orders, which is 1.2 times its revenue for 23 years, providing a safety cushion for revenue.

Profit forecasting and valuation

Considering the slowdown in industry demand, increased competition, and strong downward pressure on gross margin, we adjusted the company's 24-26 net profit forecast to 0.669/0.641/0.635 billion yuan (previous value 0.78/0.75/0.76 billion yuan). Comparatively, the company's 25-year Wind unanimously expects an average of 11xPE. Considering on the one hand, the recent policy increases and the real estate chain is expected to improve in recent years. As an industry leader, the company is expected to take the lead in benefiting as the industry pattern continues to be optimized. It will give the company 16 x PE in 25 years, adjust the target price to 3.86 yuan (previous value 3.84 yuan, corresponding to 13 x PE in 24 years), and maintain the “increase” rating.

Risk warning: Order growth falls short of expectations; project payback falls short of expectations.