The company achieved operating income of 1.925 billion in the first three quarters, down 2.9% from the same period last year, and achieved a net profit of 346 million, an increase of 5.7% over the same period last year. In terms of Q3 alone, operating income and net profit increased by 0.9% and 9.2% respectively compared with the same period last year.

Gross profit margin continues to improve and profitability is steadily rising. 1) the gross profit margin of 23Q3 is 55.4%, which is higher than that of the same period last year. 2) expense rate: 23Q3 sales / management / R & D expense rates are 25.6%, 4.3%, 3.3%, respectively, + 0.2/-1.3/-0.7pct compared with the same period last year. 3) effective tax rate: 23Q3 achieves an effective tax rate of 19.3%, increasing 1.6pct compared with the same period last year. 4) net interest rate: 23Q3 achieved a net return rate of 19.5%, an increase of 1.5pct over the same period last year.

Direct channels lead growth. 23Q3 online / direct marketing / franchise channels achieved revenue of 230 million / 150 million / 200 million, an increase of-2.9% and 2.1% respectively over the same period last year.

The operation quality of the company is excellent. As of 23Q3, the company's ending inventory was 790 million, down 11.0% from a year earlier, and inventory turnover days were 239 days, down 8 days from a year earlier. The cash flow of the company's operating activities in the first three quarters was 320 million, an increase of 8.2% over the same period last year.

In the context of the changing consumer environment and macro-economy, the company's 23Q3 shows strong business resilience, which proves that the company's brand potential is still improving, and meticulous management has achieved initial results. in addition, the company's long-term high cash dividend rate also reflects the long-term emphasis on shareholder returns. The company continues to upgrade the super image of the store this year, accelerate the expansion of joining channels in the blank market, and continue to maintain a high-quality operation level online, which is expected to further consolidate its leading position in the fierce industry competition.

According to the three-quarter report, we adjusted our earnings forecast (mainly adjusted income, gross profit margin, etc.) and forecast earnings per share of 0.70,0.79,0.88 yuan (originally 0.69max 0.77max 0.86 yuan) from 2023 to 2025. With reference to comparable companies, we maintained a 15-fold PE valuation in 2023, corresponding to a target price of 10.50 yuan, maintaining the "overweight" rating.

Risk tips: intensified competition in the industry, weakening terminal consumer demand, and so on.