The company announced the cancellation of the allotment plan, which may facilitate valuation restoration; the company's Q3 revenue was -14.9% to 183.1 billion yuan, and net profit to mother was -91.8% to 0.86 billion yuan. After excluding the impact of Macalline's restructuring earnings, the company's Q3 net profit to mother was -14.6% YoY, and the decline narrowed month-on-month.

The announcement may withdraw the allotment application or facilitate the restoration of the company's valuation. On November 5, the company announced that due to changes in the internal and external environment and factors such as the company's internal situation and development plans, it decided to terminate the current placement of shares to the original shareholders and withdraw the application documents. The original planned allotment raised 4.98 billion dollars. The company announced that based on changes in the internal and external environment, combined with factors such as the company's internal situation and development plans, the company made the decision to cancel the allotment of shares after thorough discussion and careful study by all relevant parties, which will not have a significant adverse impact on the company's normal production and operation activities, and will not harm the interests of the company and all shareholders, especially small and medium shareholders.

Supply chain: Q3 results were repaired month-on-month. In the first three quarters of 2024, the company's supply chain business revenue was 414.7 billion yuan, and net profit to mother was 2.24 billion yuan, or -10.2%; of these, Q3's supply chain business revenue was 151.1 billion yuan, -17.3%, and +7.2% month-on-month, achieving net profit to mother of 0.82 billion yuan, -0.3% year-on-year, and +26.9% month-on-month. Q3 gross margin fell 0.2 percentage points to 1.5% year on year, and net interest rate to mother was 0.5%, which was the same year on year. The year-on-year decline in the company's supply chain business was mainly affected by the macroeconomic situation, commodity price fluctuations, and weakness in the traditional automobile industry. Profits from the company's commodity collection and distribution business and automobile sales business declined year-on-year; however, from a month-on-month perspective, the Q3 company's supply chain business recovered.

Real estate: The decline in gross margin and asset depreciation together dragged down real estate's performance in the first three quarters. In the first three quarters, the company achieved real estate business operating revenue/net profit/net profit to mother of 81.34 billion/ 2.44 billion/ 0.38 billion, up 26% year-on-year, up 21.2%/down 19%, respectively. (1) The increase in real estate revenue is expected to result from an increase in settlement volume. (2) The decline in net profit may be mainly due to a year-on-year decline in gross margin of 2 pct to 12%, and depreciation was applied. Among them, C&D Real Estate and MediaDevelopment Group both calculated 0.67 and 0.66 billion inventory price reduction provisions, respectively. (3) Net profit attributable to mother declined less or mainly due to a decrease in minority shareholders' share of profit and loss. (4) Status of net profit subsidiary companies. Among them, C&D Real Estate achieved net profit to mother of 1.605 billion yuan, contributing 0.659 billion yuan to the company's real estate business division, an increase of 0.101 billion yuan over the previous year; MediaTek Group's real estate business realized net profit to mother of -0.352 billion yuan, and net profit due to the company's real estate business division was -0.373 billion yuan, a decrease of 0.285 billion yuan over the previous year. In the third quarter of a single quarter, the company achieved real estate revenue/net profit/net profit to mother of 30.1 billion/0.84 billion/0.23 billion, a year-on-year decline of 32%/a decrease of 48%/an increase of 6.2%, respectively. (1) The decline in real estate revenue is expected to result from a decline in settlement volume. (2) The decline in net profit may be mainly due to a year-on-year decline in gross margin of 2 pct to 11%, and depreciation was applied. Among them, C&D Real Estate and MediaDevelopment Group both calculated 0.2 billion and 50 million inventory price reductions, respectively. (3) Net profit attributable to mother increased or decreased mainly due to minority shareholders' share of profit and loss. The profit and loss ratio of the company's minority shareholders in the third quarter was 73%, a year-on-year decline of 13 pcts.

In October, the monthly real estate sales growth rate was corrected, and the sales ranking of C&D real estate increased. According to Kerry data, in the first 10 months of 2024, the company achieved full-caliber sales of 130.88 billion yuan, a year-on-year decrease of 33.1%. Among them, C&D Real Estate had full-caliber sales of 103.97 billion yuan in the first 10 months, ranking 7th, up 2 places from the previous year.

The total sales volume of C&D Real Estate and MediaTek Group in October was 26.53 billion, an increase of 45.7% over the previous year, and achieved a positive monthly sales growth rate. Sales improvements have benefited from active land acquisition and policy catalysts in the early stages.

Home Furnishing Mall Operations: Results for the first three quarters were mainly affected by the decline in Macalline occupancy rates and increased losses due to changes in fair value of investment real estate. Net profit to mother of -0.567 billion yuan was achieved in the first three quarters, mainly due to the phased decline in the rental rate of Macallon shopping malls. In order to support the continued operation of merchants, Macalline's operating income and profit decreased year-on-year due to factors such as increased business stabilization and retention concessions to merchants. At the same time, due to increased losses due to changes in fair value of investment real estate, it affected Macalline's net profit to mother of -1.911 billion yuan, which ultimately contributed to C&D's consolidated statement of -0.567 billion yuan. The decline in the third quarter results was also affected by the above two factors. In the third quarter of a single year, Macalline's net profit to mother was -0.638 billion, and the net profit contributing to the consolidated statement of C&D shares was -0.19 billion yuan.

Investment advice: Considering that the macroeconomy is expected to warm up, and the long-term logic of improving the competitive pattern in the real estate industry or increasing the valuation premium of high-quality green housing enterprises, and further optimizing real estate policies or boosting demand for high-energy cities, the company is expected to maintain its competitive advantage in the long term. We expect the company's net profit to be 3.14/4.09/4.84 billion yuan in 2024-26, respectively, and the current stock price corresponding to 2024-26 P/E will be 9.2/7.1/6.0 times, respectively. Furthermore, the company was given an “increase in wealth” rating by comprehensively considering the effects of industry sentiment, real estate business impairment, and changes in Macalline's fair value.

Risk warning: Commodity price fluctuation risk; real estate demand falls short of expectations; gross margin falls short of expectations.