The company announced the 2023 three-quarter report. In the first three quarters of 2023, the company's operating income was 1,925 million yuan, down 2.90% year on year, net profit was 346 million yuan, up 5.69% year on year, and net profit after deducting non-return net profit of 307 million yuan, up 5.88% year on year. Among them, in the third quarter, the company's single-quarter operating income was 653 million yuan, up 0.88% year on year, net profit from the mother was 127 million yuan, up 9.17% year on year, and net profit after deducting non-return net profit of 113 million yuan, up 15.50% year on year.

The revenue performance of all channels improved in the third quarter in a single quarter. By channel, in the first three quarters of 2023, the company's online revenue was 760 million yuan, down 5.06% year on year, direct sales revenue was 457 million yuan, down 3.76% year on year, franchise revenue was 518 million yuan, down 1.23% year on year, and group purchase revenue and other revenue was 190 million yuan, up 3.98% year on year. Among them, online, direct, franchise, group purchases and other revenue for the third quarter were 229 million yuan, 145 million yuan, 195 million yuan, and 84 million yuan respectively, with year-on-year changes of -2.93%, 2.14%, 0.83%, and 10.54%, respectively.

Gross margin increased, period expense ratio decreased, and the quality of operations was excellent. The company's gross margin and period expense ratio for the first three quarters of 2023 were 54.59% and 33.73%, respectively, up 1.44 percentage points and down 0.44 percentage points from the previous year. Among them, the company's gross margin and period expenses for the third quarter were 55.39% and 32.78%, respectively, up 1.54 percentage points and down 1.94 percentage points year on year. The increase in gross margin is expected to be mainly due to product upgrades and the deepening of retail management in stores, and an increase in the gross margin of direct operations. The company's inventory turnover days and accounts receivable turnover days for the first three quarters of 2023 were 239 days and 32 days, respectively, a year-on-year decrease of 8 days and an increase of 8 days. The company's net operating cash flow was 324 million yuan, up 8.18% year on year.

Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 0.69 yuan/share, 0.77 yuan/share, and 0.86 yuan/share, respectively. Referring to the historical average price-earnings ratio valuation, the company was given a price-earnings ratio of 13 times in 2024, with a reasonable value of 9.96 yuan/share, maintaining a “buy” rating.

Risk warning. The risk of increased market competition; the risk of a slowdown in the growth rate of real estate sales; the risk of rising labor costs and fluctuations in raw material prices.