Incident: On the evening of October 14, the company released the “Performance Forecast for the First Three Quarters of 2024”. 9M24 achieved operating income of 4.03-4.191 billion yuan (yoy +25%-30%), net profit due to mother 2.018-2.098 billion yuan (yoy +25%-30%), and net profit of 1.885-1.957 billion yuan (yoy +31%-36%) after deducting non-return to mother.

Revenue and net profit grew steadily in the first three quarters, and the medium- to long-term competitive advantage continued to be consolidated. According to the company's performance forecast, 9M24 achieved operating income of 4.03-4.191 billion yuan (yoy +25%-30%), net profit to mother 2.018-2.098 billion yuan (yoy +25%-30%), and net profit of 1.885-1.957 billion yuan (yoy +31%-36%) after deducting net income from mother. Looking at a single quarter, on a median basis, 24Q3 achieved revenue of 1.446 billion yuan (yoy +22.5%), net profit of 0.705 billion yuan (yoy +20.5%), net profit after deducting 0.666 billion yuan (yoy +24.5%). The net profit growth rate for 24Q3 was slightly lower than the revenue growth rate. We think the main factors are:

1) Exchange losses due to exchange rate fluctuations in 24Q3 had a certain impact on the company's net profit (exchange earnings for the same period in 23Q3).

2) Due to structural changes in income. The gross margin of the company's conference products and cloud office terminals is lower than that of desktop communication terminals. The rapid revenue growth of the two had a slight impact on the company's overall gross margin.

Conference products continue to grow rapidly, and cloud office terminal products are growing at an accelerated pace. Market demand continued to improve in the first three quarters, and the company's various businesses progressed steadily. Specifically, 1) Conference products continued to grow at a high rate (24h1YoY +51.27%). As the mainstream foreign conference software, Microsoft Teams already occupied more than 20% of the conference software market share. The company is deeply bound to Microsoft, the conference product matrix continues to be rich, product performance continues to improve, and there is still plenty of room for future market share growth. 2) Desktop communication terminals as a whole achieved positive year-on-year growth. It is expected that after the impact of 24H1 short-term channel inventory replenishment subsides, the overall product line will return to normal growth. 3) The growth of cloud office terminals is accelerating (24H1 yoy +29.29%). The company continues to improve the quality of headset products, promote channel development for BH series products, and the positive business trend continues to consolidate.

A subsidiary in Singapore was established and part of the supply chain was relocated to enhance the company's ability to deal with potential trade risks. In September '23, the company invested 10 million dollars of its own capital to establish a wholly-owned subsidiary in Singapore. On the one hand, it promoted the company's global strategic layout; on the other hand, it provided strong support for the company to prevent potential trade risks in local markets. The company plans to gradually relocate part of the supply chain by 24H2 to further enhance the company's flexibility in dealing with changes in trade policies and enhance the company's overall business stability.

The company attaches great importance to shareholder returns. Assuming that the dividend ratio for the full year of '24 is the same as in '23, the company's current dividend ratio is 4.29%. Since the company currently has no major capital expenditure projects within the scope and the overall financial situation is stable, the company will actively reward investors and ensure that operating results are shared with shareholders. Considering that the company's dividend ratio for the full year of '23 reached 87.92%, assuming that the total dividend rate for the full year of '24 was the same, the dividend rate on the latest closing day of the company reached 4.36% (higher than 2.25% of the annual interest rate of major state-owned listed companies and major shareholders to buy back their holdings and increase their holdings and strategic investment stock loan products).

Investment advice: The company's net profit due to mother in 2024-2026 is estimated to be 2.5 billion yuan, 3.033 billion yuan, and 3.635 billion yuan, respectively, corresponding to PE of 20.2 times, 16.6 times, and 13.9 times, respectively, maintaining the “increase” rating.

Risk warning: Increased market competition, rising raw material prices, and uncertainty in new product development.