Event: Yinghantong released its 24Q3 earnings report. 2024Q1-Q3 achieved operating income of 0.408 billion yuan, +15.98% year over year; net profit to mother was 0.083 billion yuan, +21.00% year over year. Single Q3 revenue/net profit to mother/ net profit after deducting non-attributable net profit were 0.147 billion yuan/0.03 billion/ 0.028 billion yuan, respectively, +27.6%/+34.1%/45.3% year-on-year; gross margin/net profit margin was 53.5%/20.3%, respectively.

The 24Q3 revenue side of the company grew steadily year on year. Revenue growth was mainly due to growth in industrial IoT products and enterprise network products. Revenue from industrial IoT products/enterprise network products/digital distribution control system products/ technical services and other products in the first three quarters was +23.4%/+134.5%/+1.1%/-54.6%/+37.4%, corresponding to the year-on-year revenue growth rate of each 24H1 business was +19.8%/+126.4%/-0.5%/-67.8%/+69.7%. Overall, the revenue growth rate of industrial IoT products increased year-on-year in Q3. Enterprise network products continued to grow at a high growth rate, and digital distribution grids recovered Growth, the decline in revenue from smart sales control products has narrowed, and demand is still weak.

The 24Q3 gross profit margin was 53.5%, a year-on-year decrease, a month-on-month increase of 1.1 pct, or a month-on-month increase of 1.2 pct due to factors such as rising raw material costs or increased market competition, mainly benefiting from business structure optimization. Among them, the company's fast-growing industrial IoT products and enterprise network product businesses are also businesses with high gross margins. The net interest rate for 24Q3 was 20.3%, up 1.0 pct year on year, mainly due to the remarkable effect of the company's fee rate control. The fee rate during the 24Q3 period was 30.1%, a year-on-year decrease of -5.4 pct. Among them, the sales expense ratio and financial expense ratio increased 2.4 pct and 2.9 pct month-on-month, which was a significant increase compared with other expense rates; the R&D expense ratio was 10.0%, down 2.8 pcts year over year, and 2.5 pct month-on-month.

Looking ahead to 2025, as the company accelerates global market expansion and strengthens its industrial IoT product capabilities, Yinghantong is expected to gain more share in overseas markets. In order to further increase gross margin and net profit margin, the company needs to continue to promote the development and sales of high value-added products, which is the key to its future growth.

Investment advice: Net profit due to mother is expected to be 0.12/0.15/0.2 billion yuan respectively in 24-26, corresponding year-on-year growth rates of 23%/28%/34%, respectively, and corresponding PE is 22/17/13 times, respectively, maintaining a “buy” rating.

Risk warning: Overseas economic recovery is slower than expected; new products fall short of expectations; risk of exchange rate fluctuations.