Highly optimistic about the company's long-term development and maintaining a “buy” rating

Considering the outstanding competitiveness of the company's products and the performance continues to exceed expectations, we raised the company's 2024-2026 net profit forecast to 1.98, 2.762, and 3.745 billion yuan (the original forecast was 1.793, 2.518, 3.37 billion yuan), EPS was 0.85, 1.19, and 1.61 yuan/share. The current stock price corresponds to PE of 137.4, 98.5, and 72.6 times, respectively, to maintain a “buy” rating.

Rapid revenue and profit growth, demonstrating product competitiveness

The company achieved operating income of 6.137 billion yuan in the first three quarters of 2024, an increase of 55.64% year on year; realized net profit of 1.526 billion yuan, an increase of 69.22% year on year; realized net profit after deducting non-return to mother 1.475 billion yuan, an increase of 76.87% year on year. Among them, Q3 achieved revenue of 2.374 billion yuan in a single quarter, up 78.33% year on year; realized net profit of 0.672 billion yuan, up 199.90% year on year; realized net profit deducted from non-mother 0.657 billion yuan, up 205.85% year on year. The company's revenue and profit greatly exceeded expectations. It can be determined that the industry's credit innovation continues to be booming, and the competitiveness of the company's products is outstanding.

Profitability increased dramatically, and continued inventory growth confirmed strong downstream demand (1) The company's comprehensive gross margin for the first three quarters was 65.63%, an increase of 5 percentage points over the previous year. Among them, the gross margin for the Q3 quarter was 69.13%, up 12.9 percentage points from the previous year. Profitability has increased dramatically, and we judge that it is mainly due to the increase in sales share of high-end products. (2) The company's sales expense ratio in the first three quarters was 1.96%, up 0.31 percentage points year on year. The management expense ratio and R&D expense ratio were 1.66% and 29.56% respectively, down 0.90 and 2.88 percentage points year on year, and operating efficiency improved markedly. (3) The company's inventory at the end of the third quarter was 3.896 billion yuan, up 1.441 billion yuan from the end of the second quarter. Continued increase in inventory indicates that the company has sufficient stocks and strong downstream demand.

The Haiguang DCU series has outstanding ecological advantages, and rapid iteration is expected to become the mainstream GPU product in China. The Haiguang DCU series products are based on GPGPU architecture and are compatible with general “CUDA-like” environments. Haiguang DCU can support full-precision model training, achieve comprehensive application of large models represented by LLAma, GPT, Bloom, ChatGLM, etc., and fully compatible with domestic models, including Wenxin, etc., to reach the leading level in China. The company's DCU products are rapidly iterating and are expected to become mainstream GPU products in China.

Risk warning: Risk of high customer concentration, risk of market competition.