The company's 24Q3 revenue was 4.52 billion yuan/ +19.3%, adjusted net profit 0.67 billion yuan/ +6.9%, its Chinese famous brand revenue was 2.44 billion/ +5.7%, overseas revenue of famous brands was 1.81 billion/ +39.8%, and TOPTOY revenue was 0.27 billion/ +50.4%. The consumer market of interest is broad. The “1+3” moat of the company's “1 Chinese supply chain+global IP+global design+global channel” is stable. They are optimistic about the steady expansion of famous companies domestically, the overseas market continues to grow at a high rate, and the long-term growth brought about by TOP TOY's continuous incubation. Maintain a “Highly Recommended” rating.

Revenue continued to grow at a high rate, and profit margins declined slightly year-on-year due to the acceleration of direct-run store expansion. The company's 24Q3 revenue was 4.52 billion yuan/ +19.3%, gross margin was 44.9% /+3.1 pct; adjusted net profit was 0.69 billion yuan/ +6.9%, and adjusted net margin was 15.2% /-1.8pct. In terms of revenue split, the revenue of famous domestic brands is 2.44 billion/ +5.7%, overseas revenue of famous brands is 1.81 billion/ +39.8%, and TOPTOY revenue is 0.27 billion/ +50.4%.

Famous innovation from mainland China: The pace of store expansion is relatively fast. The same store was under pressure due to a high base in the same period last year. The revenue of the 24Q3 Mingchuang brand in mainland China was 2.44 billion yuan/ +5.7%. It is expected that due to factors such as Barbie's high base in the same period last year and the decline in domestic shopping mall traffic, the growth of the same store in Q3 will be pressured. In 24Q3, the net number of domestic Mingchuang stores was 135, and the number of stores reached 4,250 at the end of Q3, continuing to expand rapidly. Looking at YTD in 2024 (until the end of November), domestic same-store sales of famous brands fell by mid-single digits. Among them, the customer unit price increased by 0.2% year on year, and the average customer order volume fell by a single digit year on year.

Overseas famous innovation: store expansion is speeding up, and overseas revenue continues to grow at a high rate. The overseas revenue of 24Q3 Mingchuang brand was 1.81 billion/ +39.8%, of which direct market revenue increased 55.4% year on year, and overseas agency market revenue increased 26.5% year on year. In Q3, there were 183 net stores opened overseas, and the number of stores at the end of Q3 was 2,936. 24Q3 Mingchuang's overseas revenue has reached 40% /+5.9pct of the company's revenue, and the overseas share continues to increase. In 2024 YTD, the number of same-store stores of famous brands in overseas markets grew to a high number of units. Among them, same-store sales in the direct market and agency market both achieved high unit volume growth.

TOPTOY: The opening of stores has accelerated markedly and is gradually expanding overseas. The 24Q3 TOP TOY brand achieved revenue of 0.27 billion/ +50.1%. The net increase in the number of stores this quarter was 39 to 234. TOPTOY's store opening accelerated markedly. In 2024, TOPTOY's same-store sales increased by mid-single digits. In October 2024, the first overseas TOPTOY store opened in Bangkok, Thailand, gradually expanding overseas expansion.

Investment advice. In the short term, the company's domestic operations are growing steadily, and overseas expansion is rapid. Looking at the long-term, there is a broad consumer market of interest. The “1+3” moat of the company's “1 Chinese supply chain+global IP+global design+global channel” is stable. They are optimistic about Mingchuang's steady domestic expansion, the overseas market continues to grow at a high rate, and the long-term growth brought about by TOP TOY's continuous incubation. The company's 2024E/25E/26E adjusted net profit is estimated to be 2.8/3.47/4.16 billion, respectively, maintaining the “Highly Recommended” rating.

Risk warning: Store expansion falls short of expectations, and single store revenue growth falls short of expectations.