Description of the event

The company's 2024Q1-3 gross revenue was 27.516 billion yuan (-9.14% YoY); net profit to mother was 8.579 billion yuan (YoY -15.92%), after deducting non-net profit of 8.397 billion yuan (-17.39% YoY). The company's total revenue for 2024Q3 was 4.641 billion yuan (-44.82% YoY); net profit to mother was 0.631 billion yuan (YoY -73.03%), after deducting non-net profit of 0.456 billion yuan (-81.41% YoY).

Incident comments

The company actively controls the pace and helps eliminate inventory. At this stage, the company is focusing on removing inventory and adjusting channel relationships, and the reporting side for the third quarter is under pressure. Total operating income plus △ contract liabilities for Q1-3 in 2024 was 21.377 billion yuan (-3.08% YoY), of which 2024Q3 gross operating revenue+△ contract liabilities were 5.669 billion yuan (-34.11% YoY). The company received cash flow of 24.232 billion yuan from sales of goods and provision of labor services in 2024Q1-3 (-5.13% YoY), of which the cash flow received from sales of goods and provision of labor services in 2024Q3 was 6.42 billion yuan (-33.49% YoY).

The product structure has dragged down profitability, and gross margin has declined significantly. Looking at the situation in the third quarter of 2024, the company's high-end products were under some pressure, driving gross margin -8.63pct year-on-year to 66.24%. At the same time, the company increased spending to help dealers remove inventory. The cost rate during the Q3 period was +15.75pct to 35.62% year on year, with detailed changes: sales expense ratio (+12.27pct year over year). Affected by this, the company's net profit margin for 2024Q3 fell 14.23pct year-on-year to 13.61%.

The company's internal changes have continued in recent years. Since the beginning of the year, the company's internal product strategy and channel strategy have been further clarified, and personnel have stabilized. At this stage, the company is focusing on removing inventory, focusing on channel relationship optimization, consumer education, etc., and increasing expenses to help dealers remove inventory. Currently, inventory has declined month-on-month. The company is expected to resume growth after phased adjustments. The company's EPS is expected to be 5.53/5.17/5.21 yuan in 2024/2025/2026, corresponding to the latest PE of 15/16/15 times, maintaining a “buy” rating.

Risk warning

1. Industry demand falls short of expectations;

2. Increased market price fluctuations, etc.