The company's recent situation

The company recently issued an announcement to increase the majority shareholders' holdings. The controlling shareholder Yate Group plans to increase its holdings by no less than 50 million yuan or no more than 0.1 billion yuan through centralized bidding transactions or bulk transactions within 6 months from November 21. We sort out and comment on recent changes in the company's equity.

reviews

Yate Group, the majority shareholder of the company, plans to increase its holdings by 50 million-0.1 billion yuan over the next 6 months, demonstrating shareholders' confidence in the steady development of the company. In 2022, Yate Group bought back 13% of its shares from Fosun. Currently, Yate Group and its co-actors hold a total of 26.6% of the shares. This time, Yate Group may increase its holdings of about 2.48 million shares to -4.97 million shares from the secondary market (calculated at the closing price on November 22), accounting for 0.49%-0.98% of the total share capital. We believe that the increase in majority shareholders' holdings will help guarantee the steady progress of the company's second venture, demonstrating shareholders' confidence in the company's development prospects.

In addition to measures to increase holdings at the level of majority shareholders, the company is also continuing to repurchase shares, which may be used to motivate employees in the future, etc., with the aim of further stimulating the company's development potential. The company announced a share repurchase plan in March 2024. It plans to use 0.1-0.2 billion yuan of the company's own capital to repurchase shares and use it for employee stock ownership plans or equity incentives within the next 12 months. As of October 31, 2024, the company has repurchased a total of 0.193 billion yuan (corresponding to 10.42 million shares, accounting for 2.06% of the total share capital). We expect the company to disclose the corresponding employee incentive plan after the repurchase plan is completed next year. At that time, the company's development potential may be further stimulated.

The company is stable and stable, and may be able to smoothly cope with fluctuations in the industry cycle. The company's 3Q24 revenue was +15.8% YoY /1-3Q24 revenue +15.3%, corresponding profit was +108.8%/+22.17%, respectively, and continued to be ahead of the overall growth rate of the sector; we believe it mainly benefited from the company's active and flexible response to industry cycle fluctuations and advance repayment and marketing efforts for year series and soft series; at the same time, the company was steadily promoting series of star repayments in the fourth quarter, and the short-term pace schedule was more flexible. From a medium- to long-term perspective, the corporate governance and management mechanism is excellent to ensure a steady increase in the company's share within the province and the continuous upgrading of the structure; at the same time, the company's layout outside the province is beginning to show results. 3Q24 accounts for 30% of the company's revenue outside the province, achieving +37.9% over the same period last year, and there may be more room for development in the future.

Profit forecasting and valuation

Considering the intensification of competition in the industry, the company may increase its investment response. We maintained our profit forecast for 2024 and lowered our profit forecast for 2025 by 6% to 0.477 billion yuan. We maintain our target price of 22 yuan, which corresponds to the 2024/25 27/23X price-earnings ratio, and the current stock price corresponds to the 2024/25 25/21X price-earnings ratio. There is 7.8% upside compared to the target price, maintaining an outperforming industry rating.

risks

Gansu's economic development and consumption upgrades fell short of expectations, competition within the province intensified, expansion outside the province fell short of expectations, and the company's shareholders reduced their holdings, putting pressure on stock prices.