Incident Overview: The company disclosed the 2024 three-quarter report: achieved revenue of 28.314 billion yuan, +18.84% year over year; net profit to mother of 5.479 billion yuan, +32.79% year over year; net profit after deducting non-return to mother of 5.551 billion yuan, +36.65% year over year.

Revenue is at an all-time high, and gross margin continues to rise. The company achieved revenue of 28.314 billion yuan in the first three quarters of 2024, +18.84% year-on-year, of which 2024Q3 revenue was 9.974 billion yuan, +13.41% year-on-year and +4.94% month-on-month, achieving a record high revenue in a single quarter. The company achieved net profit attributable to mother of 5.479 billion yuan in the first three quarters of 2024, of which net profit for 2024Q3 was 1.98 billion yuan, +53.54% YoY and -6.19% month-on-month; in the first three quarters of 2024, net profit without return to mother was 5.551 billion yuan, +36.65% YoY, of which 2024Q3 net profit was 1.974 billion yuan, +55.56% YoY and -4.09% YoY, of which:

1) Exchange loss of 0.138 billion yuan from the beginning of the year to the end of 2024Q3. Exchange earnings for the same period last year were positive, resulting in a year-on-year decrease of 0.473 billion yuan in total profit for the first three quarters of 2024; 2) From the beginning of the year to the end of 2024 Q3, Taiyuan Jinnuo Industrial terminated the implementation of Beijing Futong's remaining 24% share transfer agreement, reducing investment income by 0.212 billion yuan, resulting in a year-on-year decrease of 0.212 billion yuan in total profit for the first three quarters of 2024; after reverting to the above impact, the company 2024 Total profit for the first three quarters was +48.43% year-on-year.

The company's revenue and profit continued to grow year on year, mainly due to: 1) the company increased its marketing efforts to promote revenue growth; 2) the proportion of high-value-added products such as smart panoramic canopy glass, dimmable glass, head-up display glass, ultra-insulating glass, lightweight ultra-thin glass, coated heat-resistant glass, and tempered laminated glass continued to increase; 3) As a leading enterprise in the automotive glass industry, volume and price continued to increase, and the siphon effect continued to increase.

The company's gross margin reached 38.78% in 2024Q3, +2.47pct year on year, +1.05pct month-on-month. The increase in gross margin was mainly due to a decrease in soda ash costs; in terms of cost, 2024Q3 R&D expenses reached 0.431 billion yuan, +19.61% year over year, corresponding to R&D expenses +0.22pct to 4.32% year over year. Continued investment in R&D was mainly due to continuous R&D innovation, which promoted the company's technological upgrading and product added value increase. The 2024Q3 sales expense ratio, management expense ratio, and financial expense ratio were -0.35pct, +0.28pct, and -3.11pct, respectively, to 4.32%, 7.41%, and -1.18%, respectively. The decline in sales and management expenses mainly benefited from scale effects.

The globalization of automotive glass faucets has entered a harvest period. As a leading automotive glass company, in 2024, the company's domestic market share will reach more than 70%, and the global automotive glass industry market share is about 30%, ranking first in the world.

Currently, it has achieved layout in China, the United States, Russia, Europe, etc., and has strong vertical control capabilities in industrial chains such as float glass and silica sand. High barriers have contributed to the company's excellent profitability. Since December 2023, the company's two investments will together 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.

Intelligent electrification drives the continuous improvement of the Gasglass ASP. Thanks to the development of intelligent electrification in the automotive industry, glass usage and functional demand are constantly increasing: 1) Tesla is leading the trend of canopy glass, and the penetration rate is increasing at an accelerated pace. The canopy glass significantly increases the area of bicycle glass, thereby increasing the supporting value of bicycles; currently, the average amount of bicycle glass used has increased to 3.9-4.5 meters? Around the same time, the amount of automotive glass used was about 1 times higher than in the 1950s; 2) The company cooperated strategically with BOE and Beidou Intelligence in smart car windows to strengthen the layout. The revenue share of high-value-added smart glass such as HUD glass, dimming glass, and ultra-insulating glass benefited from increased industry penetration and continued to increase.

Horizontal business expansion and integration of SAM continued to contribute incrementally. The company started and introduced SAM in February 2019. SAM specializes in aluminum trim products, forming a synergy with the company's automotive glass business. Currently, SAM integration is progressing steadily, and we expect profitability to gradually improve. The aluminum trim can be integrated with the gas glass, in line with the customer's modular and integrated procurement trend, and SAM integration is expected to continue to contribute to growth in the medium to long term.

Investment advice: The company's global layout has entered a harvest period, and the global market share is expected to increase. High-value-added auto glass products will gradually be released, and SAM's profitability will gradually improve. We forecast the company's revenue for 2024-2026 to be 39.931/46.635/53.692 billion yuan, net profit to mother of 7.703/8.802/10.182 billion yuan, corresponding EPS of 2.95/3.37/3.90 yuan, corresponding to the closing price of 56.86 yuan/share on October 17, 2024, PE was 19/17/15 times, respectively, maintaining the “recommended” rating.

Risk warning: Automobile sales fell short of expectations, US factory profit improvement was lower than expected, SAM integration progress was lower than expected, raw material prices rose, etc.