Proya’s 3Q26 revenue rose 29.8% YoY to RMB2,253mn, well above our expectations. However, recurring attributable NP fell 65.2% YoY to RMB79mn, below our expectations, due to trimmed GPM and rising selling ratio. FlowerKnows consolidation and rapid growth in emerging brands reinforced the broader portfolio’s contribution to sales. The Ruby Cream 4.0 launch and Douyin expansion also lay the groundwork for future growth, although heavier investment and a lower gross margin from shifting brand and category mix weighed on near-term profitability. The group’s growth drivers are broadening, and the early Double 11 performance indicates that investment in 3Q26 is starting to pay off. We maintain BUY and retain our earnings forecasts and TP of RMB89.58, based on a target P/E of 30x.

The broader portfolio supported sales. 1) Established brands are showing signs of improvement: Proya’s 3Q26 revenue fell by single digits YoY, dropping its share of group revenue below 50%. Management reported strong Double 11 presales for Ruby Cream 4.0 (>1mn units) and the Yunbai series (>RMB100mn), which could help stabilize flagship-brand sales. TIMAGE’s YoY decline narrowed to single digits in 3Q26. 2) Emerging brands maintained strong momentum: OR (>50% YoY in 9M26), Awaken Seeds (+103.5% YoY in 1H26) and INSBAHA (>100% YoY in 9M26).

A more balanced channel mix highlights omnichannel strengths. The group’s channel mix became more balanced in 9M26, as offline revenue grew by high double digits YoY and accounted for a larger share of total revenue. Among online platforms, Douyin’s contribution to flagship-brand revenue surpassed Tmall’s (30%+ v.s. 25%+). Proya remains an industry leader in omnichannel execution.

Lower GPM and heavier selling expenses squeezed core profitability. GPM fell 4.9ppts YoY to 69.8% in 3Q26 on lower margin of FlowerKnows, higher offline contribution and changes in brand and category mix. The selling ratio rose 3.5ppts YoY to 53.4%, driven by Ruby Cream 4.0 launch spending, investment in emerging brands, and higher traffic costs and spending on Douyin. Recurring NPM fell 9.6ppts YoY to 3.5%, suggesting a near-term focus on market share over profitability.

Valuation: We maintain BUY and retain our TP of RMB89.58, based on an unchanged target P/E of 30x. Despite a larger-than-expected decline in 3Q26 recurring NP, we maintain our full-year forecasts for now, supported by greater earnings contribution in 4Q and the solid start to Double 11. Risks: slower-than-expected core-brand recovery, traffic-cost hike, and weaker-than-expected earnings contributions from emerging brands.