Jinwu Financial News | Guosen Securities released a research note, indicating that due to the weak domestic retail environment, Pou Sheng Int'l (03813) saw its revenue decrease by 10.8% year-on-year to 4 billion yuan in the third quarter; net income attributable to the parent company increased by 40.0% year-on-year to 0.01 billion yuan. The discount rate in the third quarter remained stable year-on-year, and gross margin increased by 1.5 percentage points to 33.5%. In terms of expenses, the company actively sought to reduce rental deductions, closed inefficient stores, and improved labor efficiency, resulting in a 7.8% year-on-year reduction in total sales and management expenses to 1.37 billion yuan in the third quarter. However, due to the decline in revenue, the proportion of fixed costs rose, leading to a slight increase in the sales/management expense ratios by 0.5/0.6 percentage points year-on-year to 29.9%/4.3%. Mainly benefiting from the improvement in gross margin, net margin attributable to the parent company increased by 0.1 percentage points year-on-year to 0.2%. Due to the earlier singles' day sales promotion compared to previous years, in preparation for the gold sales period, inventory value in the third quarter increased by 12% year-on-year to 5.5 billion yuan, and inventory turnover days increased by 7 days year-on-year to 152 days, with the proportion of old inventory controlled at a healthy level of 8%.

The bank noted that the company's online omni-channel revenue increased by 13% year-on-year in the first three quarters, accounting for 27% of total revenue. By empowering online channels to connect private domain, public domain, and physical networks, the B2C public domain channels (such as Tmall, jd.com, vipshop, etc.) and private domain channels (such as Fanwei Store) saw year-on-year revenue increases of 24% and 2% respectively. The Douyin platform actively optimized its live broadcast operation structure, integrating regional and store-level Douyin accounts for localized operations, resulting in a doubling of revenue, with a year-on-year increase of 100%. The company's net operating income in October increased by 4.7% year-on-year to 1.72 billion yuan, mainly driven by the growth of online channels, which is expected to be related to the earlier singles' day sales promotion. Overall consumption demand in the industry was weak in the third quarter, but consumption trends have improved since the fourth quarter, and the bank expects the company's sales to improve on a quarter-on-quarter basis in the fourth quarter.

The bank stated that looking ahead, even though short-term revenue growth is pressured by weakened consumer power, profitability is expected to continue to improve based on healthy inventory and stable discounts. Given that short-term retail environment pressures remain considerable, the bank slightly lowered its profit forecast, expecting net income for 2024-2026 to be 4.9/6.2/7.6 billion yuan (previous estimates were 0.53/0.66/0.81 billion yuan), with year-on-year changes of -1%/+27%/+23%; the target price has been adjusted to 0.59-0.69 Hong Kong dollars (previously 0.65-0.76 Hong Kong dollars), corresponding to a 6-7x PE for 2024, maintaining an "outperform the market" rating.