Results for the first three quarters of 2024 are in line with market expectations

The company announced results for the first three quarters of 2024: operating income of 0.182 billion yuan, +7.01% year on year; realized net profit of 0.014 billion yuan, -63.79% year over year; net profit after deduction of 0.004 billion yuan, -88.89% year on year. Looking at a single quarter, 3Q24 achieved operating income of 0.064 billion yuan, +8.74% year over month, and +0.49% month on month; net profit to mother of 0.009 billion yuan, +37.80% year over year, and -21.88% month on month. The results are in line with market expectations.

Development trends

The scale of revenue has steadily expanded, and product gross margin has remained high. 1) The company's revenue scale expanded steadily, and net profit increased by 37.80% in a single quarter, reflecting the steady operation of the company's high-speed and high-precision AD/DA, power management chips and SiP systems, and steady progress in product production and delivery. 2) The company's gross margin for the first three quarters of 2024 was 5.58ppt to 84.11% year on year, and gross margin remained high. We believe that the gross margin adjustment was mainly due to increased manufacturing costs due to product restructuring and use of new office buildings; net margin was -15.50ppt to 7.93% year over year, mainly due to increased management expenses and year-on-year decrease in interest income due to the purchase of headquarters base buildings.

Cost control on the sales and R&D side is good, and the conclusion of the IPO project strengthens technical advantages. 1) The company's expense ratio for the first three quarters of 2024 was +9.88ppt to 68.07% year-on-year. Among them, sales/R&D expenses were -0.32pp/ -0.21ppt to 6.64%/51.86%, respectively, and sales and R&D expenses were well controlled. The expansion of the expense ratio is mainly due to the year-on-year decline in interest income for the current period, resulting in a financial expense ratio of +8.90ppt to -9.41% year over year. 2) According to the company's announcement, as of September 30, 2024, the company's IPO fundraising project “Headquarters Base and Frontier Technology Research and Development Project” has been invested and is ready for use. We believe it is expected to support the company's cutting-edge technology research and development and maintain the company's technological advantages.

Deeply involved in special RF analog chips, stock buybacks reflect confidence in development. 1) The company is one of the few domestic enterprises that can provide special RF analog chip solutions. The products are widely used in information technology equipment such as satellite internet, data links, communication terminals, phased arrays, etc.; 2) The company closely follows the low-orbit satellite industry trend, and various power management chips have been applied on the planet. The size and weight of newly developed SiP products is 90% lower than traditional solutions. We believe that the company closely follows trends in the satellite industry and is expected to share the dividends of the low-orbit satellite constellation industry with technical barriers and first-mover advantages. 3) According to the company's announcement, following the actual controller's proposal, the company plans to repurchase 0.2 to 0.04 billion yuan of company shares, demonstrating management's confidence in the company's long-term development prospects.

Profit forecasting and valuation

We keep the company's profit forecast for 2024/2025 unchanged, and the current stock price corresponds to 49.7xp/E in 2025. We are optimistic about the company's leading edge in the analog chip field, maintain the industry rating, and consider the upward trend in the industry valuation center. We raised the target price by 64% to 42.20 yuan, corresponding to 60 xP/E in 2025, with a potential increase of 21%.

risks

Macroenvironmental and policy risks; order delivery falls short of expectations.