3Q24 revenue was basically in line with consistent expectations. Non-GAAP net profit was higher than the agreed 3Q24 revenue of 1.91 billion yuan, up 19% year on year, and was basically flat from month to month, basically in line with our agreed expectations; non-GAAP net profit of 0.74 billion yuan, higher than the agreed forecast of 9%, mainly due to interest income exceeding expectations.

Development trends

The growth of job-seeking users accelerated in 3Q24, and the imbalance between supply and demand improved in 4Q24. The 3Q24 platform's MAU was 58 million, and the year-on-year growth accelerated to 30%. The company's cumulative number of new and improved users from January to September 2024 has exceeded 40 million. However, we believe that the significant increase in new C-side users in 3Q24 is greater than that of B-side enterprise users, and the shortening time for companies to fill vacancies will affect corporate payment rates in the short term; entering 4Q24, the company's performance will indicate that the C/B share pressure on new users has decreased by the end of the year, and users are expected to increase 15% year over year next year.

The share of blue collar revenue continued to rise in 3Q24. 3Q24's revenue was 1.91 billion yuan, up 19% year on year, which was basically the same as our expectations; according to our calculation, 3Q24's cash revenue was 1.81 billion yuan, up 10.5% year on year, down 7.3% month on month. From an account perspective, as of 3Q24, the number of paying corporate accounts in 12 months was 6 million, an increase of 22.4% over the previous year, but the overall payment rate in 3Q24 slowed; however, corporate ARPU remained stable. Overall, the company's performance in 3Q24 showed that blue-collar recruitment performance was superior to white-collar recruitment. The urban service industry recovered in 3Q, while manufacturing, warehousing, logistics, automobiles, etc. performed well. Among them, the cumulative number of companies enrolled in the Conch Preferred Program increased by 45% month-on-month, and contract amounts increased by more than 40% month-on-month. Currently, the company's share of blue-collar revenue has further increased to more than 38%; in addition, in terms of enterprise size, BOSS direct recruitment 3Q showed a clear “concentrated effect” — enterprises with more than 0.01 million people and companies with less than 100 people were willing to pay Stronger.

Maintain profit side discipline. 3Q24's gross margin was 84%, which was basically the same; in terms of expenses, 3Q24's sales expenses rate was 27.3%, and even with marketing campaigns for the European Cup and Olympics, there was a 1ppt month-on-month decrease; R&D expenses decreased by 1.5ppt year on year; 3Q24 non-GAAP operating margin was 31.7%, up 2.5ppt year over year. At the same time, we have observed a sharp decline in the company's SBC fees this quarter, and we believe that SBC will continue to maintain a downward trend in the future. We expect 4Q24's non-GAAP OPM to be 36%; looking at the full year, the company's performance will guide maintaining the non-GAAP operating profit target of 2.3 billion yuan unchanged. The company values shareholder returns. Since the last quarterly results meeting, it has repurchased $0.13 billion and has repurchased $0.22 billion since the beginning of the year.

Profit forecasting and valuation

We kept our 2024/2025 revenue forecast unchanged. Due to the company's high interest income and prudent expense control, we raised 2024/2025 non-GAAP net profit 6.6%/4.7% to 2.7/3.1 billion yuan, respectively; maintained an outperforming industry rating. Due to recent good market sentiment and rising valuation center, we raised the target price by 11.5% to $14.5, corresponding 17 times/15 times the 2024/2025 non-GAAP P/E, which is 3 times higher than the current stock price % upside, current share price is trading 17x/15x non-GAAP P/E in 2024/2025.

risks

The macroeconomy is declining, corporate recruitment demand is weak, and the competitive landscape has deteriorated.