Incident: 2024Q1-3's operating income/net profit to mother/ net profit after deducting non-return to mother were 19.069/4.746/4.7 billion yuan (YoY +19.53%/+24.49%/+25.55%); 2024Q3 company's operating revenue/net profit attributable to mother/ net profit after deducted to mother was 5.263/1.174/1.159 billion yuan, respectively (+13.36%/+13.60%/+14.52%).

The potential of yearly puree continues, and nationalization is progressing steadily. 2024Q3's operating revenue/net profit to mother was 5.263/1.174 billion yuan respectively (+13.36%/+13.60% YoY). Against the backdrop of relatively weak demand, Gujing Gongjiu's Q3 revenue and profit growth potential is still strong. We expect that the annual volume of crude pulp in the province will continue to release and establish the basic market for the company's growth. Furthermore, the company's nationalization is progressing steadily, and the market outside the province is being built. The first tier has 4-5 markets breaking through 1 billion yuan, the second tier 0.3-0.5 billion yuan market has certain reserves, and the third tier has all exceeded 100 million yuan, so there is room for future nationalization expansion.

Q3 Gross margin was under slight pressure, and the scale effect continued to be released, and cost ratio reductions continued to be realized. The 24Q3 company's gross margin/net profit margin was -1.55/+0.05pcts to 77.87%/22.30%; sales expenses ratio/management expense ratios were -5.32/-0.14pcts to 23.01%/6.07%, respectively; operating net cash flow was +34.55% to 1.334 billion yuan; advance payments (including contract liabilities) were -41.61%/-12.75% to 1.936 billion yuan, respectively. We expect that the decline in gross margin is mainly due to a phased recovery in the share of the company's relatively low-priced single products. The increase in the company's net interest rate was relatively small due to the decline in the sales expense ratio, mainly due to the Q3 single quarter tax and additional rate of +2.40pcts to 17.21% year-on-year.

Considering the relatively weak overall demand, we lowered the company's profit forecast slightly. The company's revenue for 24-26 is 23.96/28.16/32.68 billion yuan (previous values were 24.74/29.53/34.75 billion yuan, respectively), and net profit to mother is 5.57/6.91/8.39 billion yuan (previous values were 5.9/7.48/9.22 billion yuan, respectively), and the corresponding PE is 20.8X/16.8X/13.8X to maintain “buying” ” Ratings.

Risk warning: Industry competition intensifies; consumer demand falls short of expectations; promotion of nationalization falls short of expectations; promotion of high-end products falls short of expectations.