Event: On October 28, 2024, Xinbao Co., Ltd. released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 12.69 billion yuan (+17.99%), net profit of 0.785 billion yuan (+6.66%), and net profit of non-return to mother of 0.797 billion yuan (-0.57%).

2024Q3 saw double-digit growth on the revenue side and steady performance on the profit side. 1) Revenue side: 2024Q3's revenue reached 4.967 billion yuan (+12.88%), achieving double-digit growth, or benefiting from the faster growth rate of export sales; in the first three quarters of 2023, the company's domestic sales and export sales revenue reached 2.575 billion yuan (-1.25%) and 10.114 billion yuan (+24.15%) respectively, and the total demand for small overseas household appliances was strong. 2) Profit side: 2024Q3's net profit to mother reached 0.343 billion yuan (+0.53%), and the performance was relatively stable.

2024Q3 gross margin is under short-term pressure, and overall cost ratio control is reasonable. 1) Gross profit margin: In 2024Q3, the company's gross margin reached 20.87% (-2.23pct), under short-term pressure. 2) Net interest rate: 2024Q3's net profit margin reached 7.11% (-0.94pct), which narrowed compared with the decline in gross margin. 3) Expense side: In 2024Q3, the company's sales/management/R&D/finance expenses rates were 2.97% (-0.22pct), 4.77% (-0.25pct), 3.25% (-0.35pct), and 0.92% (+0.96pct), respectively. The increase in financial expense ratio was relatively obvious, and the overall cost rate control was reasonable.

Investment advice: On the industry side, demand in the domestic small household appliance market is gradually recovering, demand in the overseas small household appliance market is strong, and demand in the global Western-style small household appliance market may grow steadily. On the company side, the product matrix is gradually improving, and high-quality new products are continuously launched; many of its brands fully cover the different needs of consumers and lay out more small household appliances such as coffee machines; the channel side creates a social e-commerce model, combining online and offline to further unblock domestic sales channels. We expect the company's net profit to be 1.1/1.235/1.401 billion yuan in 2024-2026, the corresponding EPS is 1.35/1.52/1.73 yuan, and the PE corresponding to the current stock price is 11.02/9.82/8.65 times, respectively. Maintain a “buy” rating.

Risk warning: macroeconomic fluctuations, raw material price fluctuations, exchange rate fluctuations, the risk of additional tariffs, increased market competition, etc.