Incident: The company released its 2024 three-quarter report. Revenue for the first three quarters of 2024 increased by 19.5% and net profit to mother increased by 24.5%; 3Q2024 revenue and net profit to mother increased by 13.4% and 13.6% respectively. Increased gross sales margin led to continuous improvement in net interest rates.

Structural growth in the province continues. 3Q2024's revenue also increased 13.4%. By product, the annual growth rate of puree payments was nearly 20%. Among them, Gu 8/Gu 16 grew by more than 30%; Gu 20 decelerated to 16%.

The Mid-Autumn Festival National Day continued the off-season trend. Against the backdrop of a high base of banquets in Anhui Province, the wedding banquet scene was under year-on-year pressure. The number of college entrance banquets remained low and increased at the same time, and the product structure was concentrated at 100 to 300 yuan in the context of simultaneous consumption upgrades and downgrades. Looking at the subregions, repayment tasks within the province have basically been completed. Among them, parts of central Anhui and southern Anhui have already been overcompleted, and the degree of completion in northern Anhui is relatively poor. The annual completion progress of tasks outside the province is 70-90%.

Increased channel costs have put a slight strain on gross margins. 3Q2024 net margin also increased by 0.17pct to 23.1%, with 3Q2024 gross margin decreasing by 1.55pct. We expect this is mainly due to a decline in product structure and an increase in cost investment. The 3Q2024 sales rate and management rate (including R&D expenses) decreased by 5.32 and 0.13 pct year-on-year, respectively.

We expect that it is mainly due to the company's spending more focused on the consumer side, and the digital accuracy of the cost investment has improved. 3Q2024 redeemed 5.46 billion yuan, up 24.6% year on year; 3Q2024's revenue ratio was 103.74%, with year-over-year changes of +9.34/ -2.60pct, respectively. Contract debt at the end of 3Q2024 was 1.936 billion yuan, with year-over-year/month-on-month changes of -1.379/-0.282 billion yuan, respectively.

Investment advice: Looking at the whole year, Furui is expected to continue to benefit from structured (100-300 yuan) growth potential in the province with channel operation capabilities. It is expected that the 2024 repayment target will be achieved with high certainty. On the cost side, the company's rate optimization is expected to be maintained. The company is expected to achieve operating income of 23.94/26.87/30.61 billion yuan in 2024-2026, 18.2%/12.3%/13.9%; net profit to mother of 5.48/6.38/7.62 billion yuan, 19.4%/16.5%/19.3% year over year, corresponding PE 19.3/16.6/13.9 times, maintaining the “increase” rating.

Risk warning: macroeconomic recovery falls short of expected risk; new product promotion falls short of expected risk; food safety risk; consumer scenario repair falls short of expected risk.