In the first three quarters, the company achieved operating income of 1.846 billion, an increase of 7.4% over the same period last year, a net profit of 414 million, an increase of 10.2%, and a deduction of 353 million, an increase of 10.8% over the same period last year. In terms of Q3 alone, the company realized operating income and net profit of 598 million and 107 million, down 3.3% and 13.6% respectively from the same period last year.

DZ and RA performed better, while DA and DM declined. In terms of brand, 1) DA:23Q3 realized revenue of 330 million, down 8.8% from the same period last year, and gross profit margin increased by 1.1pct to 74.0% compared with the same period last year. 2) DM:23Q3 realized revenue of 31 million, down 18.4% from the same period last year, and gross profit margin decreased by 1.5pct to 75.4% compared with the same period last year. 3) DZ:23Q3 realized revenue of 230 million, an increase of 8.0% over the same period last year, and gross profit margin increased by 0.3pct to 71.0% over the same period last year. 4) RA:23Q3 realized revenue of 7 million, an increase of 39.0% over the same period last year, and gross profit margin increased by 0.7pct to 73.3% over the same period last year.

Offline channels are under pressure, while online channels maintain rapid growth. From a sub-channel point of view: 1) offline direct marketing: 23Q3 achieved revenue of 229 million, down 9.0% from the same period last year, and gross profit margin increased by 2.8pct to 78.3%, including 20 customs stores in a single quarter. 2) offline distribution: 23Q3 achieved revenue of 290 million, down 5.7% from the same period last year, and gross profit margin dropped 1.7pct to 67.5% from the same period last year, including 24 customs stores in a single quarter. 3) E-commerce: 23Q3 achieved 82 million revenue, an increase of 31.5% year-on-year, and gross profit margin increased by 0.8pct to 77.2% year-on-year.

Single-quarter gross profit margin increased year-on-year, inventory level increased. 1) Gross profit margin: 23Q3's gross profit margin is 72.9%, an increase of 0.5pct over the same period last year. The main reason is the increase in e-commerce gross profit margin compared with the same period last year, and the further increase in the proportion of e-commerce revenue with relatively high gross profit margin. 2) the sales / management / R & D expense rate of 23Q3 is 36.8%, 7.8% and 3.0%, respectively, and + 0.01/+0.8/+0.1pct, respectively, compared with the same period last year. 3) the company's net interest rate was 17.9% in the third quarter, down 2.1pct from the same period last year. 4) as of 23Q3, the company's inventory was 478 million yuan, an increase of 22.3% over the same period last year, and the inventory turnover days increased by 27.13 to 248.41 days compared with the same period last year.

The company has accelerated the upgrading of online channels in recent years, and offline channels are under pressure in the third quarter, looking forward to Q4 company's sales performance.

In the medium and long term, the company's omni-channel CRM project and private domain operation project were launched in August 2023, unifying the omni-channel consumer experience is conducive to the improvement of the company's business quality, and we are still optimistic about the investment value brought by the company's growth resilience and historically high dividends.

According to the three quarterly reports, we adjust our earnings forecast and forecast earnings per share of 1.11max 1.31max 1.54 yuan (originally 1.18,1.39 and 1.62 yuan) from 2023 to 2025. With reference to comparable companies, we give a valuation of 16 times PE in 2023, corresponding to a target price of 17.73 yuan, maintaining a "buy" rating.

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