Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 1.435 billion yuan, a year-on-year increase of 25.11%; realized net profit to mother of 0.228 billion yuan, a year-on-year decrease of 6.76%; and realized deducted non-net profit of 0.22 billion yuan, an increase of 2.00% year on year. In 2024, Q3 achieved operating income of 0.501 billion yuan, up 9.39% year on year and 2.23% month on month; net profit to mother was 0.066 billion yuan, down 45.92% year on year, down 22.22% month on month; after deducting non-net profit of 0.063 billion yuan, down 44.68% year on year and 25.56% month on month.

Q3 revenue grew steadily year on year, and profitability was under slight pressure: in the first three quarters of 2024, in the first three quarters of 2024, in the display business, smartphones accounted for about 51%, high-definition TVs accounted for about 36%, and laptops accounted for about 6%; in the non-display business, power management accounted for about 56%, and RF front-ends accounted for nearly 38%. In Q3 2024, the company's revenue grew steadily year over year. However, profitability declined slightly due to increased costs such as equipment depreciation, equity incentives, and labor costs. Q3 The company's overall gross margin was 30.84%, down 8.85pcts year on year; net margin was 13.24%, down 13.54 pcts year on year. In terms of expenses, the company's sales, management, R&D and financial expenses in Q3 2024 were 0.73%/6.20%/8.29%/0.84%, respectively, with year-on-year changes of +0.39/+0.37/+2.44/+2.41pcts, respectively.

The AMOLED penetration rate continues to increase, and the outlook for the Q4 large size shows that demand is expected to pick up: the company points out that the effects of the shift of the industry to the mainland continue to ferment, and demand for small-size express orders has increased significantly, steadily rising slightly; benefiting from policies such as production control and marketing control and trade-in, it is expected that Q4 large sizes will have inventory recovery requirements.

At the same time, thanks to the continuous layout of AMOLED by major panel manufacturers such as BOE, Vicino, and Tianma, the AMOLED penetration rate continues to grow. According to CINNO Research statistics, according to CINNO Research statistics, AMOLED smartphone panel shipments in the H1 global market in 2024 were about 0.42 billion pieces, with a year-on-year increase of 50.1%, of which Q2 increased 55.3% year-on-year and 13.1% month-on-month; in addition, according to Omdia estimates, demand for AMOLED smartphones will continue to grow, and with the expansion of other application fields, the AMOLED display driver chip market will remain until 2028 Double digit growth. The company said that due to factors such as the continued increase in the penetration rate of AMOLED in mobile phones and tablet applications, the shift of the display panel industry to mainland China, and the improvement of the domestic display chip supply chain, the company's AMOLED revenue share gradually increased, and AMOLED accounted for about 26% of revenue from January to September 2024.

The rapid increase in AMOLED penetration has laid a solid foundation for the rapid growth of the company's performance.

DDIC's leading position in packaging and testing is stable, and its business layout is expanding steadily: According to the company's 2023 annual report, the company's annual display driver chip packaging and testing business sold 1.391 billion units and generated revenue of 1.463 billion yuan. It is the display driver chip packaging and testing company with the highest revenue in the domestic market, ranking third in the field of display driver chip packaging and testing in the world. While continuously consolidating its dominant position in the field of display driver chip packaging and testing, the company gradually expanded its business into the field of non-display chip packaging and testing, mainly power management chips and RF front-end chips, continued to expand its technical product line, continue to make efforts in new processes, new products, etc., to the upper end of the value chain, actively expand the company's business layout, and move towards advanced integrated circuit sealing and testing manufacturers. In the first three quarters of 2024, the company's non-display chip packaging and testing sales accounted for 8%. Among them, Q3 PMIC copper block business revenue reached a record high, and it is estimated that Q4 will decline slightly month-on-month; in terms of RF front-end chip DPS, demand for Q3 declined month-on-month due to consumer market fluctuations, and Q4 is expected to help achieve mass production during the quarter by expanding new customers.

Maintaining a “buy” rating: The company is mainly engaged in advanced packaging and testing of integrated circuits, mainly focusing on the field of display driver chip packaging and testing of non-display chips represented by power management chips and RF front-end chips. Since 2023, the company has continuously strengthened its core capabilities in the field of advanced packaging testing, continuously improving the technical level, expanding the scope of product applications, reducing production costs, improving daily operating efficiency, and achieving both revenue and profit growth. Looking forward to the future, as demand for consumer electronics picks up and the boom in the semiconductor industry recovers, the company's profitability is expected to be further restored; at the same time, as AMOLED penetration continues to increase and the company's 12-inch wafer sealing and testing capacity in Hefei is released in an orderly manner, the company is expected to further open up the growth ceiling. The company's profit forecast for 2024-2025 was lowered in view of the consumer electronics terminal market demand situation and the performance pressure brought about by the company's new depreciation in the Hefei factory, and combined with the company's three-quarter financial report. We expect the company's net profit for 2024-2026 to be 0.298 billion yuan, 0.403 billion yuan, 0.52 billion yuan, EPS 0.25 yuan, 0.34 yuan, 0.44 yuan, PE 46X, 34X, and 26X respectively.

Risk warning: Risk of developing non-display businesses falling short of expectations, risk of increased market competition, risk of exchange rate fluctuations, risk of industry fluctuations and changes in demand.