Incident Overview

The company released its 2024 three-quarter report: the first three quarters achieved revenue of 6.105 billion yuan, a year-on-year decrease of 29.62%; net loss attributable to shareholders of listed companies was 1.887 billion yuan, net profit after deduction of -1.052 billion yuan, and the profit side declined a lot. We determine that the main reason is the slow recovery of post-real estate cycle consumption and the acceleration of industry clearance, causing the company to gradually decline in shopping mall occupancy rates over the same period last year. At the same time, the company implemented temporary provisions such as rent and management fee exemptions and concessions, resulting in the company's rental income and management fee revenue There was a phased decline. In terms of cash flow, the net cash flow from the company's operating activities was -0.531 billion yuan, a decrease of 119.20% compared to the same period last year. Looking at a single quarter, 2024Q3 achieved revenue of 1.88 billion yuan, or -37.64% of the same period; realized net profit to mother of -0.634 billion yuan, net profit after deducting non-return to mother of -0.467 billion yuan.

Analytical judgment:

Revenue side: Revenue is under pressure, and Q4 national supplement catalysts can be expected

2024Q3 revenue continues to be under pressure, mainly due to fluctuations in the overall economic environment, the phased decline in shopping mall occupancy rates, the company increased offers to support the continued operation of merchants, and the number of projects in other business sectors decreased and progress slowed. The performance of the company's own shopping malls was relatively steady in the first three quarters, with overall revenue of 4.344 billion yuan, or -19.1% year-on-year. This year, national and regional “trade-in” policies were intensively introduced, and a 15%-20% “state subsidy” stimulus was introduced in September, which received widespread consumer attention. According to the Observer Network, Macalline responded positively to the national call and fully connected 223 shopping malls in nearly 20 provinces and cities from October 13 to November 11 to fully access the government platform to promote “trade-in” for home appliances and homes on a large scale. Shanghai, where the policy was introduced earlier, has already begun to bear fruit. According to Opinion Network, during the National Day Golden Week, the company's eight shopping malls sold 0.143 billion yuan from October 1 to 7, an increase of 112% over last year, and the number of effective car arrivals was 0.0162 million, an increase of 24% over last year, achieving a double increase in passenger flow and sales. With the gradual improvement of national supplement coverage, demand for Q4 home renewal is expected to be further catalyzed.

Profit side: Expenses are relatively rigid, and net profit continues to lose money

In terms of profitability, the company's gross profit margin for the first three quarters of 2024 was 59.42%, up 1.62 pct year on year, and the net interest rate was -32.84%, -25.67 pct year on year; looking at the Q3 gross profit margin was 56.62%, +2.38 pct year on year, and the net profit margin was -36.01%, or -11.39 pct year on year. In terms of expenses, the company's expense ratio for the first three quarters of 2024 was 54.76%, up 7.90pct year on year, of which the sales expense ratio was 12.35%, -0.57pct year on year; management expense ratio was 12.27%, +0.15ct year on year; R&D expense ratio was 0.18%, +0.02pct year on year; and financial expense ratio was 29.96%, up 8.30pct year on year. Looking at a single quarter, the cost rate for the Q3 period was 59.48%, +9.49pct year on year, of which the sales expense ratio was 15.48%, -1.59pct; the management expense ratio was 14.04%, +1.43ct; the R&D expense ratio was 0.20%, +0.05pct year on year; and the financial expense ratio was 29.76%, up 9.60 pct year on year.

Lay out a new high-end ecosystem and activate the stock market

High-end home appliances: The company released the “3+ Star Ecosystem” strategy in March '24, and launched a “new three-year” plan for high-end appliances. In the first half of '24, Chaodian Hui officially opened Red Star Macalline Zhengzhou Zhongyuan Global Home Furnishing Store No. 1; High-end Home Furnishing: The company extended consumers' home consumption in the mall to the design process. Through the introduction of design studios, it landed at the M+ High-end Design Center to create another high-quality traffic portal, based on the completion of the first batch of 16 M+ high-end home improvement design centers. The second batch of 84 The construction of the center co-creates a new ecosystem of high-end home decoration design; the collaborative development of multiple business formats: the company combines the automobile category with the home category to achieve a comprehensive service platform for one-stop “home” consumption of commodities. In addition, the company actively responded to trade-in, opened up service links, and activated the stock market. In March '24, the company launched the first batch of 32 store trade-in pilot projects in 15 cities across the country. The company vigorously promotes the collaborative development of multiple business formats, which is conducive to improving the quality of operation and expanding the scope of performance growth. It is worth looking forward to subsequent performance.

Investment advice

The company has now formed a “10+1" three-dimensional home ecosystem with full online and offline layout, full coverage of home, home improvement, high-end appliances, and full links between brands and designer resources; considering that current terminal demand is still under high pressure and that it will still take some time to collaborate and integrate with the C&D business, we have lowered our profit forecast. The estimated revenue for 2024-2026 is 8.651/9.069/9.365 billion yuan, respectively (previous value 11.614/11.929/12.323 billion yuan), EPS is -0.56/ 0.03/0.11 yuan (previous value 0.02/0.08/0.12 yuan) Corresponding to the closing price of 3.08 yuan/share on November 4, 2024, PE was -5.46/114.02/27.10X for 24-26, respectively. Maintain an “Overweight” rating.

Risk warning

1) Real estate sales fell short of expectations. 2) The new business is not progressing smoothly. 3) The results of cooperation with new shareholders fell short of expectations.