The company released the 24Q3 quarterly report. The first three quarters achieved revenue of 1.08 billion yuan, a year-on-year decrease of 6.49%, and realized a net profit of 0.092 billion yuan, a year-on-year decrease of 15.99%. Among them, 24Q3 revenue and net profit to mother increased by -16.8% and 2.1% year-on-year respectively, and net profit after deducting non-return to mother was -0.006 billion yuan.

The OEM business performed better than the brand. Looking at the breakdown, the own-brand business achieved revenue of 0.61 billion in the first three quarters, a year-on-year decrease of 8.9%; the OEM business (OEM/ODM) achieved revenue of 0.47 billion yuan, a year-on-year decrease of 3.07%.

Looking at the breakdown of brand business: 1) By store type: In the first three quarters, revenue from Komaki direct stores, Komaki franchise stores, Omaki online and DaMaki offline increased by -26.8%, 6.3%, -15.2%, and -5.7%, respectively. 2) Channel division: Online and offline sales revenue declined 15.7% and 4.9%, respectively, in the first three quarters.

In terms of profitability, 24Q3 gross margin increased 0.2 pct to 28.3% year on year, and the cost ratio increased. Among them, 24Q3 sales, management and R&D expenses increased 2.1, 3.7, and 1.9 pct year on year, respectively. On the other hand, the effective tax rate for 24Q3 companies was 25.4%, a sharp decrease of 11.8 pct from the previous year. Other income was 0.026 billion, compared to 0.001 billion in the same period last year. The above two factors increased profitability for the quarter.

A new brand image was unveiled, and Lengshan Gene was upgraded again. In the first half of the year, the company's new brand image “Born into the Wild” made a spectacular debut, leading a new trend in Chinese camping and hiking culture. At the same time, the company released the “A Journey Beyond the Edge” program (A Journey Beyond the Edge) to build a hardcore outdoor brand belonging to China based on the Hengduan Mountains in China, showcasing the company's deep outdoor brand genes. In terms of products, the cold mountain gene has been upgraded to cover all categories of professional camping, hiking, and mountaineering equipment and clothing. We believe that with long-term accumulation and deep insight into the industry, the company can gradually consolidate its leading position in the industry and look forward to flexible performance after the industry recovers.

According to the three-quarter report, we adjusted the profit forecast and introduced the 2026 profit forecast, predicting earnings of 1.09, 1.3, and 1.44 yuan per share for 24-26 (2.54 and 3.1 yuan for 24-25). Referring to comparable companies, we gave a PE valuation of 22 times in 2024. The target price was 24.01 yuan, maintaining an “gain” rating.

Risk warning: industry competition intensifies, terminal consumer demand weakens, overseas inventory removal falls short of expectations, etc.