HEILAN HOME(600398) 国信证券·2024-11-06 06:10Investment Rating - The investment rating for the company is "Outperform the Market" [5][19]. Core Views - The company experienced an 11% decline in revenue in the third quarter, with increased expense ratios putting pressure on profitability. The overall retail environment for clothing has been challenging since 2024, leading to a significant drop in consumer demand [2][12]. - The company's net profit for the third quarter fell by 64.9% year-on-year to 270 million yuan, with a net profit margin decrease of 9.1 percentage points to 8.4% [2][10]. - Inventory levels increased significantly, with a year-on-year growth of 53.5% to 12.33 billion yuan, primarily due to the consolidation of the subsidiary and increased procurement [2][10]. Summary by Sections Revenue and Profitability - Third-quarter revenue decreased by 11% year-on-year to 3.89 billion yuan, with a gross margin decline of 1.1 percentage points to 42.8% [2][10]. - The sales expense ratio increased by 5.8 percentage points to 24.8%, with sales expenses rising by 16% to 960 million yuan [2][10]. - The company expects a weak recovery in consumer demand for the fourth quarter and has adjusted profit forecasts for 2024-2026, estimating net profits of 2.4 billion, 2.76 billion, and 3 billion yuan respectively [12][10]. Brand and Channel Performance - The main brand's offline sales were under pressure, with a 27% decline in revenue, while e-commerce sales grew by 40% [3][12]. - The subsidiary, Sporz, contributed significantly to revenue growth, with a 110% increase in revenue from other brands due to its consolidation [3][12]. Financial Forecasts - The company has revised its revenue forecasts for 2024-2026 to 21.02 billion, 22.78 billion, and 24.6 billion yuan, reflecting a year-on-year change of -2.4%, +8.3%, and +8.0% respectively [10][12]. - The gross margin is expected to be 44.4%, 44.6%, and 44.6% for the same period, with an increase in sales expense ratios anticipated [10][12]. Valuation - The target price has been adjusted to 6.5-7.0 yuan, corresponding to a PE ratio of 13-14x for 2024 [12][10].