Is it reasonable for 111, Inc. Sponsored ADR Class A (YI.US) with a market value of only $70 million to achieve operating profit of $2 billion in revenue for three consecutive quarters?

A company with an annual revenue of around $2 billion and achieving profitability, if its market value is only $67.68 million, is it reasonable? This is the question raised by the well-known research institution Water Tower Research about 111, Inc. Sponsored ADR Class A (YI.US). Recently, 111, Inc. Sponsored ADR Class A released its 2024 Q3 financial report. Despite facing challenges from a soft consumer market and pressure from downstream pharmacies, 111, Inc. Sponsored ADR Class A's performance in the third quarter remained strong. The report showed that in this quarter, 111, Inc. Sponsored ADR Class A achieved revenue of 3.6 billion yuan, gross profit of 210 million yuan, with a year-on-year increase of 10.5% in gross profit; Non-GAAP operating profit was 7.1 million yuan, marking three consecutive quarters of operating profit and positive operating cash flow. Recently, the co-founder, chairman, and CEO of 111, Inc. Sponsored ADR Class A, Liu Junling, emphasized in a discussion with Water Tower Research that the company must maintain profitability and positive cash flow. In a challenging market environment, 111, Inc. Sponsored ADR Class A is expanding strategically through its logistics network, especially in light asset models such as joint ventures and franchise operations, to expand the layout of fulfillment centers. This innovative business model not only increases the company's total transaction volume and gross profit margin but also allows it to scale more quickly and cost-effectively. Liu Junling pointed out that many industries in China will face unprecedented challenges, but the aging population is starting to drive the development of the pharmaceutical industry. As the population structure in China changes, an aging population will lead to increased medical expenditure. China's medical expenses account for about 7% of GDP, compared to around 20% in the United States. Liu Junling believes that there is still significant room for growth in this area in China. During the reporting period, 111, Inc. Sponsored ADR Class A further strengthened its core competitiveness in digitization. Leveraging its core technological advantages, 111, Inc. Sponsored ADR Class A continued to reduce costs in operations and supply chain management, significantly improving operating efficiency. In the third quarter, the company's operating costs as a percentage of net income decreased from 7.4% in the same period last year to 5.8% this quarter. In a discussion, Liu Junling emphasized the advantages of 111, Inc. Sponsored ADR Class A in digital operations, stating, "We have a 100% digital operational system, which allows us to be an industry benchmark in operational efficiency. We must use our digital capabilities to help upstream and downstream partners benefit from it and improve efficiency. We will strive to ensure the most extensive selection, the most competitive prices, and ensure customer satisfaction with our after-sales service." Additionally, in the third quarter, 111, Inc. Sponsored ADR Class A opened four new fulfillment centers nationwide and plans to add at least five more next year. This expansion plan will further solidify 111, Inc. Sponsored ADR Class A's leading position in the digitization of the pharmaceutical supply chain and lay a solid foundation for its future growth. By combining joint venture fulfillment centers and franchise fulfillment center models, 111, Inc. Sponsored ADR Class A can launch fulfillment centers with less capital expenditure, significantly shorten the preparation time, and improve operational efficiency. Regarding the target of the ratio of operating expenses to income, Liu Junling stated that in order to reduce the ratio of operating expenses to income to below 5%, the company only needs to continuously increase business scale through greater order density. He believes that once the company's annual revenue reaches 20 billion yuan, the company should be able to achieve this goal. However, despite 111, Inc. Sponsored ADR Class A's many achievements, its stock price performance seems disconnected from its operating and financial performance. The stock price does not seem to reflect the actual value of a company with an annual revenue of around $2 billion and expected to achieve full-year operating profit and positive operating cash flow this year. Facing market undervaluation, Liu Junling said, "Since the establishment of the company, we have come a long way, spending billions of yuan to build infrastructure and integrating over 70% of independent Chinese retail pharmacies into our platform. In the long run, macro policies are favorable for us, and the population structure is increasingly favorable for our development. Of course, we also face some challenges, but we finally turned around and made a profit this year. I believe that it is only a matter of time before everyone realizes that this is a very valuable enterprise, and we hope that the value of the company will be truly reflected in the market." Water Tower Research comments pointed out that 111, Inc. Sponsored ADR Class A has net cash equivalent to $0.66 per ADS, with revenue of around $2 billion, but its stock price performance seems disconnected from revenue and financial performance.Compared to other pharmaceutical supply chain companies thriving in China, the market value to revenue ratio of 111, Inc. Sponsored ADR Class A is much lower. However, with the industry's transformation and continuous efforts of 111, Inc. Sponsored ADR Class A, it is believed that its market value will be truly reflected.Je ne comprends pas.