The company announced 202 4Q3 results:

Q3: Operating income of 0.64 billion (YoY +10.5%), net profit attributable to mother 0.03 billion (YoY -40.3%), net profit not attributable to mother 0.03 billion (Y/Y -8.2%)

Q1-3: Operating income 1.72 billion (YoY +4.2%), net profit 0.04 billion (YoY -66.6%), net non-attributable net profit 0.04 billion (YoY -48.2%)

Q3 Revenue growth was better than expected.

Revenue analysis: In-vehicle increments make up for C-side decline

To car: Q3 revenue was 0.22 billion yuan, accounting for more than 30%, a net year-on-year increase, +12% month-on-month.

The cumulative sales volume of the Genjie M9 has surpassed 0.15 million units, and the sales volume of the Enjoy S9 exceeded 8,000 units in 20 days since its launch in August; the company has obtained a total of 8 fixed points, and in-vehicle growth has been steadily realized.

To B: The estimated revenue for Q3 is about 0.3 billion, or will be affected by the revenue settlement cycle. Among them, we expect a slight decline in the cinema business from a high base. Refer to the number of Q3 movie screenings in the country -26% year over year, but the month-on-month decline has narrowed; professional displays are generally steady; light sources are affected by the downturn in terminals.

To C: The Q3 revenue adjustment is expected to continue by about 0.1 billion; referring to Lotu's sales volume of the smart projection industry -11% year-on-year in July-August, we expect Fengmi's loss to narrow steadily.

Profit analysis: the operating burden has been steadily cleared

Gross profit margin: Q3 gross profit margin of 30.4%, -8.5pct year on year. It is expected mainly due to increased vehicle share and C-side storage adjustments.

Net interest rate: Q3 net interest rate of 5.0%, year-on-year -4.3pct, sales/management/R&D/finance -3.3/-0.6/-2.4/+1.2pct, respectively. It is expected that peak rice will reduce costs and increase operating quality. In addition, GDC related expenses have been adjusted centrally in H1, which has little impact on Q3.

Investment advice: An inflection point in performance is expected to be established

Our point of view:

With the company's in-vehicle targeted intensive delivery, the product type is further expanded, which is expected to gradually contribute to profits. The B-side basic market is generally stable, the C-side is steadily reducing losses, and performance flexibility can be expected under a low base.

Profit forecast: We expect the company's revenue for 2024-2026 to 2.37/2.91/3.61 billion yuan (previous value 2.4/3/3.6 billion yuan), +7%/+23%/+24%, net profit to mother 0.08/0.19/0.28 billion yuan (previous value 0.1/0.2/0.28 billion yuan), -19%/+125%/+46%; corresponding to PE90/40/27X, maintaining the “buy” rating.

Risk warning:

Vehicles fall short of expectations, the downstream economy fluctuates, and there is a risk that raw material prices will fluctuate greatly.