2023Q1~Q3 's revenue is + 7% / performance is + 10% year-on-year. According to the company's third quarter report for 2023, 2023Q1~Q3 's revenue / performance / deduction of non-performance was RMB 1.85 billion, respectively, which was + 7% + 7% for 2022 and-9% for 2021, 25% and 30% respectively. The gross profit margin is from + 0.2pct to 74.8%, the sales / management expense rate is from-1.3/+0.1pct to 38.4% and the net profit rate is from + 0.6pct to 22.4%.

Single Q3 company revenue year-on-year-3% / performance year-on-year-14%. 2023Q3's revenue / performance was 60 million yuan, respectively, compared with-3% in 2022 and-11% in 2021, respectively. The profit quality has declined compared with the same period last year, and we judge that the increase in asset impairment loss is mainly due to the increase in 2023Q3 gross profit margin year-on-year + 0.5pct to 72.9%, sales / management expense rate flat / + 0.8pct to 36.8% 2.1pct 7.8% year-on-year; provision of asset impairment loss of 15 million yuan; taken together, the 2023Q3 net profit rate is-2.1pct to 17.9% compared with the same period last year.

DZ and RA are growing steadily and rapidly, and the operating performance of DA is in line with the industry trend. Company brand matrix differentiation positioning clear, split brand point of view: the main brand tonality is unique, VIP stickiness is high, the overall performance is relatively stable; DA brand and RZ brand is still in the channel growth stage, sales steady and rapid growth. 1) sales level: mature brand DA operates steadily, growing brand DZ and RA grow healthily, and 2023Q1~Q3 DA/DM/DZ/RA revenue is 9.94%, respectively, 7.17%, 0.28 million, and 38%, respectively, compared with the same period last year. Q3 revenue is 3.33, 0.31, 0.31, 2.277 million, respectively, and-9%, 18, and 39%, respectively, year on year. 2) Channel level:

At the end of 2023Q3, the number of DA/DM/DZ/RA brand stores at the end of 2023 was 575, 22, 469, 20, respectively, compared with 6 at the beginning of the year. We judge that DZ and RA are expected to expand stores steadily and rapidly throughout 2023.

E-commerce is growing rapidly, and offline follow-up has room for improvement. From the perspective of split channels, 1) e-commerce is growing rapidly, and the quality of operation is significantly improved. 2023Q1~Q3 's e-commerce channel revenue is from + 32% to 279 million yuan (including single Q3 revenue from + 32% to 82 million yuan) and gross profit margin from + 3.1pct to 79.1%. We judge that the proportion of new online products and discount optimization are the main factors. 2) the overall offline performance is weaker than the online performance. 2023 Q1~Q3 's revenue from direct sales / franchise channels is from + 9% to 791 million yuan compared with the same period last year (of which the revenue from single Q3 direct sales / franchise is from-9% to 286 million yuan, respectively), and the channel gross profit margin is-0.3pct/-1.0pct to 79.1% 69.0% respectively. We believe that the overall business performance is stable and in line with the industry trend.

Cash flow is well managed and inventory turnover is expected to improve in the future. 2023Q3 end inventory year-on-year + 22.3% to 480 million yuan, the company's inventory turnover days in the first three quarters compared with the same period last year + 27.1 days to 248.4 days, accounts receivable turnover days-0.1 days to 8.4 days. In terms of cash flow, the net operating cash flow in the first three quarters was 500 million yuan (about 1.2 times the net profit returned to the mother in the same period).

Revenue recovers weakly in 2023, and earnings quality is expected to be repaired year-on-year. We estimate that the company still has a single-digit decline since October compared with the same period last year. Considering that the profit quality of 2023Q4 is expected to be steadily repaired compared with the same period last year, we comprehensively judge that the company's revenue for the whole year of 2023 is expected to grow steadily in single digits, and the performance is expected to grow rapidly at a low base.

Profit forecast and investment advice: the company is a leader in middle and high-end women's wear, with excellent product design, supply chain control and rich dividends. We expect the net profit from 2023 to 2025 to be 5.2x61x690 million respectively. The current price corresponds to 13 times of PE in 2023, maintaining the "buy" rating.

Risk hints: the macroeconomic downturn leads to weak consumption; shop expansion is not as expected; and new brand cultivation is not as expected.