Key points of investment:

Incident: Debon Co., Ltd. announced Q3 2024 results. The company achieved operating income of 9.85 billion yuan (YoY +1.0%), achieved net profit of 0.18 billion yuan (YoY -19.4%), and deducted 0.15 billion yuan (YoY +1.8%). Looking at the first three quarters, 24Q1-Q3 achieved revenue of 28.3 billion yuan, +11.2% year over year, achieved net profit of 0.52 billion yuan, +9.7% year over year, and achieved deduction of 0.35 billion yuan without return to mother, or 24.7% year over year.

The revenue of the express delivery business is under pressure, and the core business volume of express delivery continues to grow. The 24Q3 express delivery business revenue was 0.54 billion yuan (-18.0% YoY), the express shipping business revenue was 8.88 billion yuan (YoY +1.2%). At the same time, the Express core business achieved volume of 3.41 million tons, +9.4% YoY, and the warehousing and supply chain business revenue was 0.44 billion yuan, +33.8% YoY.

Profits are under pressure, and active investment accounts for an increase in transportation costs. The company's 24Q3 operating costs were 9.12 billion yuan, +1.8% year-on-year. Among them, labor costs, transportation costs, rent, and right-of-use asset depreciation, depreciation and amortization costs accounted for -2.1pp/+4.4pp/-0.7pp/ -0.4pp, respectively. The reasons for the year-on-year increase in transportation costs as a proportion of revenue are: 1) changes in the business structure have increased the volume of high-freight and low-labor vehicles, supply chains, etc., and transportation costs have increased; 2) the company continues to improve customer experience and continuously increase investment in transportation resources. In 24Q3, the company achieved gross profit of 0.73 billion yuan, gross profit margin of 7.4%; period expenses of 0.52 billion yuan, year-on-year, -14.9%; realized net profit to mother of 0.18 billion yuan, -19.4% year over year; realized net profit of 0.15 billion yuan without return to mother, +1.8% year on year.

Profit forecasting and investment advice. The company is deeply involved in high-end direct management networks and insists on promoting refined cost control to reduce costs and increase efficiency. However, due to macroeconomic demand pressure, the growth of the company's express delivery business was limited. We lowered the company's net profit to the mother in 2024-26 to 0.83/1/1.15 billion yuan (previous value 1.11/1.35/1.55 billion yuan) to maintain the “buy” rating

Risk warning: risk of macro-environmental fluctuations, risk of price fluctuation of upstream factors of production, risk of worsening industry competition pattern, risk of corporate consolidation