Core Viewpoint - Zhejiang Securities maintains a "Buy" rating for Yuanyuan Group, highlighting that despite a decline in shipment volume due to a high base, product mix optimization has driven an increase in average selling price (ASP) and improved profit margins beyond expectations [1] Performance Summary - For the first three quarters of 2025, the company reported revenue of $6.02 billion, a year-on-year decrease of 1.0%, and a net profit attributable to shareholders of $280 million, down 16.0%. Manufacturing business revenue was $4.23 billion, up 2.3%, with a net profit of $260 million, down 12.6%. Retail business revenue was $1.79 billion, down 7.9%, with a net profit of $2.367 million, down 50.3%. In Q3 2025, revenue was $1.96 billion, down 5.0%, and net profit was $110 million, down 27.0% [1][2] Manufacturing Business Insights - In the first three quarters of 2025, manufacturing revenue increased by 2.3% to $4.23 billion, with shipment volume reaching 189 million pairs (up 1.3%). The ASP was $20.88 (up 3.2%). In Q3 2025, manufacturing revenue was $1.43 billion, down 4.5%, with shipment volume of 62.7 million pairs (down 5.3%) and an ASP of $21.4 (up 3.4%). The decline in shipment volume is attributed to a high base from Q3 2024, while ASP growth is due to an increased proportion of high-priced products [2][3] - Regionally, for the first three quarters of 2025, revenue from the U.S. increased by 5.4% (28.5% share), Europe by 11.7% (27.7% share), while revenue from mainland China decreased by 25.9% (13.4% share). Other regions saw a 9.2% increase (30.4% share). The decline in China is primarily due to trade friction and weak demand, while the U.S. and Europe experienced double-digit growth [2] Profitability Analysis - The capacity utilization rate for the first three quarters of 2025 was 93%, up 1 percentage point year-on-year. The gross margin was 18.3% (down 1.3 percentage points), mainly due to rising labor costs and lower-than-expected production efficiency. The SG&A expense ratio was 10.2% (down 0.2 percentage points), indicating effective cost control. The net profit margin was 6.2% (down 1.1 percentage points) [3] - In Q3 2025, the gross margin improved to 19.4% (down 1.2 percentage points year-on-year, up 1.6 percentage points quarter-on-quarter), attributed to improved factory production efficiency and product mix optimization. The SG&A expense ratio remained at 10.2% (up 0.1 percentage points), with net profit of $110 million (down 25.7%) and a net profit margin of 7.6% (down 2.2 percentage points) [3] Retail Business Performance - Retail business revenue for the first three quarters of 2025 was $1.79 billion (down 7.9%), impacted by a weak retail environment and intensified competition, with same-store sales declining by double digits. The number of offline stores was 3,338 (down 3.5%). However, online revenue grew by 13% (accounting for 33% of total revenue), with live-streaming revenue more than doubling year-on-year [4] - In Q3 2025, retail revenue was $520 million (down 6.3%), with a significant improvement in the decline rate. October revenue showed a year-on-year decrease of only 0.7%. The gross margin for the first three quarters was 33.5% (down 0.5 percentage points), primarily due to increased discounts. The SG&A expenses decreased by 6.1% year-on-year, but the SG&A expense ratio increased by 0.7 percentage points to 32% due to negative operating leverage [4] - The proportion of old inventory was 9%, with inventory turnover days at 161 days (up 9 days year-on-year), indicating a slowdown in turnover due to weaker-than-expected sales, but still within a healthy range [4]