Investment Rating - The investment rating for the company is "Outperform the Market" [5][17][29]. Core Views - The report highlights a short-term improvement in profitability and sustained long-term growth momentum despite a weak retail environment affecting revenue growth. The company has managed to improve its profitability through strict discount control and healthy inventory management [2][17]. - The company’s online channel has shown robust growth, with a 13% increase in revenue, particularly driven by the Douyin platform, which saw a 100% year-on-year revenue increase [1][17]. - The company is strategically closing underperforming stores and upgrading others to enhance efficiency, resulting in a 14% decline in revenue from physical stores [1][17]. Summary by Sections Financial Performance - In Q3, the company's revenue decreased by 10.8% year-on-year to 4.0 billion CNY, while net profit attributable to shareholders increased by 40.0% to 0.1 billion CNY. The gross margin improved by 1.5 percentage points to 33.5% due to strict discount control [1][17]. - The company’s total sales and management expenses decreased by 7.8% year-on-year to 1.37 billion CNY, although the fixed cost ratio increased due to declining revenue [1][17]. - The company’s inventory increased by 12% year-on-year to 5.5 billion CNY, with inventory turnover days rising by 7 days to 152 days [1][17]. Future Outlook - The company expects a positive sales growth in October, with a 4.7% year-on-year increase in operating income to 1.72 billion CNY, attributed to the early Double Eleven promotional activities [1][17]. - The report projects net profits for 2024-2026 to be 4.9 billion CNY, 6.2 billion CNY, and 7.6 billion CNY, reflecting a slight downward adjustment from previous estimates [2][17]. - The target price has been adjusted to 0.59-0.69 HKD, corresponding to a 6-7x PE for 2024 [2][17].
宝胜国际：第三季度收入下滑11%，严控折扣下盈利改善