3Q24 results slightly lower than market expectations

The company announced 1-3Q24 results: revenue of 2.17 billion yuan, up 5.8% year on year, net profit of 0.46 billion yuan, down 4.8% year on year, slightly lower than market expectations. We estimate that domestic real estate demand is still weak. In a single quarter, 3Q24 revenue was 0.67 billion yuan, down 5.8% year on year, and net profit to mother was 0.15 billion yuan, down 9.9% year on year.

Gross margin increased steadily in 3Q24. The 3Q24 company's comprehensive gross margin was 34.5%, up 0.8 ppt year on year. We estimate that this is mainly due to an increase in overseas revenue share. The 3Q24 company's expense ratio was 11.3%, up 3.9 ppt year on year. Among them, the sales/management/R&D/finance expenses ratio was +0.3 ppt /+1.6 ppt /+1.6ppt, respectively. In 3Q24, the company's net profit margin was 22.9%, a year-on-year decrease of 1.0ppt.

Cash flow remains adequate. 1-3Q24/3Q24 The company's net operating cash flow inflow was 0.44 billion yuan/11.89 million yuan, an increase of 1.64 million yuan/1.94 million yuan over the same period last year. As of the end of 3Q24, the company's inventory was 0.47 billion yuan, an increase of 0.17 billion yuan over the previous year, and contract liabilities were 52.66 million yuan, an increase of 5.33 million yuan over the previous year.

Development trends

Demand in the real estate industry is still weak, and attention is being paid to the need to renew and replace furniture equipment. According to the National Bureau of Statistics, 1-9M24 has a completed area of 0.37 billion square meters nationwide, a year-on-year decrease of 24.4%, and the sales area of commercial housing is 0.7 billion square meters, a year-on-year decrease of 17.1%. Demand in the real estate industry is still weak, and attention is being paid to subsequent improvements in demand. At the same time, we are concerned about the release of demand from downstream furniture manufacturers for equipment renewal, replacement and intelligent transformation. We believe that the company can benefit from its leading technology and brand advantages.

Focus on the continued expansion of overseas business. 1H24's overseas revenue increased 10.4% year on year, accounting for 26.9%. We estimate that overseas revenue will continue to grow steadily in 3Q24. In recent years, the company has continued to lay out overseas markets, and some regions have generated large-scale revenue. We recommend continuing to pay attention to the company's overseas business expansion. On the one hand, considering that overseas market expansion is expected to hedge against the downward impact of domestic real estate industry demand, and on the other hand, consider overseas business or have a better profit situation, thereby supporting the company's profit level.

Profit forecasting and valuation

Maintain an outperforming industry rating. Considering that domestic downstream real estate demand is still weak, the 2024/2025 profit forecast was lowered by 4%/8% to 0.58 billion yuan/0.62 billion yuan. Currently traded at 12.0x/11.2x 2024/2025 P/E. Considering the upward trend in the valuation center, maintain the target price of 19.80 yuan, corresponding to 14.4x/13.5x 2024/2025 P/E, with 20% upward space.

risks

The improvement in domestic demand fell short of expectations, and overseas business expansion fell short of expectations.