Incident: The company announced results for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 28.314 billion yuan, +18.84% year-on-year, and net profit to mother of 5.479 billion yuan, or +32.79% year-on-year. Among them, 24Q3 achieved operating income of 9.974 billion yuan, +13.41% YoY, +4.95% month-on-month, and net profit of 1.98 billion yuan to mother, +53.49% YoY, and -6.21%. Performance was in line with expectations.

Revenue grew month-on-month and continued to surpass auto market performance: in the third quarter of 2024, the company achieved revenue of 9.974 billion yuan, +13.41% year-on-year and +4.95% month-on-month. 2024Q3 China sold 7.524 million vehicles, -3.87% YoY, +2.67% month-on-month, while US light vehicle sales were 3.883 million units, -1.93% YoY and -4.60%. The year-on-month growth rate of the company's revenue outperformed the growth of the car market in the third quarter. We judge that it mainly benefited from the continued increase in the company's global market share, the continued decline in production capacity delivery at Fuyao's US factory, and the increase in the share of the company's automotive glass ASP and high-value-added glass.

Q3 gross margin performance was excellent, and endogenous profit further increased: 2024Q3's gross margin was 38.78%, +2.47pct year over year, and +1.05pct month-on-month. We believe it mainly benefited from factors such as the company's quality improvement and efficiency, increased scale effect, declining shipping costs, and further decline in raw material costs such as soda ash and natural gas. 2024Q3's sales/management/R&D expense rates were 4.32%/7.41%/4.32%, respectively, with a total cost rate of 16.05%, +0.16pct year over year, +0.90pct month-on-month. The increase in 24Q3 management expenses led to a year-on-month increase in the cost rate during the 24Q3 period. 24Q3 caused exchange losses of 0.124 billion yuan due to exchange rate fluctuations. After deducting the impact on exchange gains and losses, the 24Q3 company's net profit to mother increased 35.39% year on year, up 3.29% month on month, higher than the company's revenue growth performance.

The expansion of production capacity at home and abroad is driving the continuous upward trend in performance: The company has begun a new production cycle. Domestically, since December 2023, the company has invested twice to build production capacity. In total, it will form a production scale of about 46.6 million square meters of automotive safety glass per year, which is expected to reflect domestic skylight glass, export growth, and transportation needs in some overseas markets. Overseas, in August 2022, the company announced an increase in investment of 0.65 billion US dollars in the US to build projects such as coated automotive glass, tempered laminated side windows, and float glass. The company is actively expanding production capacity at home and abroad to ensure global automotive glass supply. Continued climbing in subsequent projects is expected to drive the company's global market share to a further increase.

Profit forecast: In 2024-2026, the company is expected to achieve operating income of 39.817/46.249/54.72 billion yuan, and net profit to mother of 7.564/8.874/10.53 billion yuan.

Risk warning: Production capacity construction falls short of expectations; penetration rate of new energy falls short of expectations; industry competition intensifies, etc.