Core views

The company's performance increased significantly in the third quarter of 2024. It is expected that the factors suppressing the ODM business in the early stages will gradually be mitigated, and the private brand business will develop steadily; among them, the rapid release of professional instruments, testing instruments and other products will keep the company's overall gross margin high. In terms of new product iteration, in September 2024, the company successfully released a high-end oscilloscope with an 8 GHz bandwidth and 12 bit resolution, equipped with a self-developed analog front-end chipset, laying a solid foundation for the high-end instrument strategy. At the project construction level, the company's R&D center in Chengdu was successfully expanded, and overseas production bases progressed in an orderly manner, helping the company develop in the long term.

occurrences

In the first three quarters of 2024, the company achieved revenue of 0.854 billion yuan, +8.94% year on year; net profit to mother 0.152 billion yuan, +15.00% year over year; net profit after deducting non-return to mother 0.145 billion yuan, +16.18% year on year.

In the third quarter of 2024, revenue was 0.29 billion yuan, +21.21% year over year; net profit to mother was 48.2747 million yuan, +37.36% year over year; net profit after deducting non-return to mother was 44.1416 million yuan, +22.77% year over year.

Brief review

1. 2024Q3's performance increased significantly, and the successful launch of the 8GHz high-end oscilloscope company adheres to the “dual engine” drive development strategy of instrument+instrument, and continues to promote high-end instruments and instrument specialization. 2024Q3 has achieved relatively rapid growth in revenue and profit. It is expected to be mainly due to the gradual easing of factors suppressing the ODM business in the early stages, compounded by the volume of its own brands, especially the rapid growth of professional instruments and testing instruments. In September, the company successfully released the MSO8000 HD series high-end oscilloscope with a maximum 8 GHz bandwidth and 12 bit resolution, equipped with a self-developed analog front-end chipset; with the gradual launch of high-end oscilloscopes, the test instrument business is expected to usher in high-quality growth.

2. The gross margin for the first three quarters of 2024 remained high in the same period in history. The product structure continued to be upgraded in the first three quarters of 2024. The company's comprehensive gross margin increased by 2.41 pct to 44.82% year-on-year, maintaining a high historical high level. It is expected to be mainly due to the gradual increase in the share of high-margin professional instruments and testing instruments businesses. In the first three quarters of 2024, the company's expense ratio increased by 1.07pct to 24.13%; among them, the sales expense ratio increased 0.61 pct to 9.40% year over year, mainly due to the company's continuous expansion of overseas sales channels; the management expense ratio increased 0.18 pct to 6.39% year over year, R&D expenses increased 0.42 pct to 9.38% year over year, and the financial expenses ratio decreased 0.14 pct to -1.05% year over year. The company's net interest rate increased 0.90pct year-on-year to 17.41% in the first three quarters of 2024, a record high for the same period since 2021.

3. Rapid iteration of test instruments, expansion of R&D centers and construction of overseas production bases to promote testing instruments in an orderly manner: at the oscilloscope chip level, in March 2024, the company released an oscilloscope analog front-end chipset, with a maximum FD/FG bandwidth of 10 GHz, and was applied to the company's latest 8-GHz bandwidth 12-bit resolution MSO8000 HD series high-end oscilloscope series in September, laying the foundation for later higher-end oscilloscopes. In the radio frequency field, the company will continue to develop a series of spectrum analyzers in the 40 GHz frequency range. The company has expanded from the field of traditional instruments to the electronic test and measuring instrument circuit, and has fully benefited from the current trend of domestic substitution, which is expected to enhance the company's long-term performance growth center.

Project construction: The company has a total production base of about 0.1 million square meters in Dongguan and Heyuan, with a total design capacity of more than 10 million units per year. The expansion of the Chengdu R&D center came to a successful conclusion in August 2024, and the launch of new oscilloscope and vector source products is expected to accelerate. In 2024, the company will actively promote the construction of a production base in Vietnam. It plans to start production in 2024Q4 to better meet the needs of overseas customers for general instruments and other products, diversify the risks brought about by changes in the international environment, and further consolidate and expand the overseas customer market.

Investment advice: The company is expected to achieve revenue of 1.162, 1.338, and 1.541 billion yuan respectively in 2024-2026, and net profit to mother of 2.04, 2.40.6, and 0.296 billion yuan, respectively, +26.48%, +20.42%, and +20.39% year-on-year, corresponding to the 2024-2026 dynamic PE of 20.50, 17.02, and 14.1 times, respectively, maintaining a “buy” rating.

Risk analysis

1) The risk of new product development falling short of expectations

Technological updates and the development of new products are critical to the market competitiveness and continued development of enterprises. If the company cannot continue to increase investment in technology research and development, continuously improve R&D capabilities, and achieve technological breakthroughs in high-end product fields, it may put the company in a disadvantaged position in an increasingly fierce market competition environment, which will have a certain impact on the company's market share and core competitiveness.

2) Market competition risk

The test and measurement instrument industry in which the company is located is highly competitive. It is necessary to continuously improve product innovation and R&D capabilities according to market changes and industry trends, maintain competitive advantage, and narrow the gap with leading enterprises in the industry. If the company fails to seize the current industry development opportunities and further increase its market share in the future, it will face limited market expansion, which will adversely affect the company's profitability.