The company announced 2024Q3 results:

24Q3: Operating income 6.64 billion (YoY +34.1%), net profit attributable to mother 0.46 billion (YoY -14.1%), net profit not attributable to mother 0.45 billion (-7.8% YoY).

24Q1-3: Operating income 16.16 billion (YoY +27.4%), net profit 1.37 billion (YoY +7.9%), net non-return profit 1.31 billion (YoY +17.3%).

Q3 Profit fluctuations in a single quarter were mainly due to internal business adjustments.

Revenue Analysis: TV ODM Drives Growth

Multimedia audiovisual: Q3 revenue is expected to exceed +35% year-on-year as the main driver. Refer to Lotu's TV ODMQ3 shipments of 4.4 million units (+40% year over year), mainly due to peak season storage for major North American customers, and delays in shipping for some Q2 orders.

LED industry chain: Q3 revenue is expected to continue H1 by about +30% year over year. Among them, the chip structure improved, and the share of domestic supply increased, and the performance was better than the industry; packaged miniLED backlights benefited from a high growth in downstream emissions; COB directly showed that shipments had recovered significantly compared to Q2.

Profit analysis: Single quarter fluctuations due to business adjustments

Q3 gross margin was 4.3 pct year over year, -3.2 pct month on month; net profit margin was -3.9 pct year on year, -2.2 pct month on month, sales/management/R&D/finance rates were -0.5/+0.3/-0.5 pct year on year, respectively.

According to our split forecast: 1) TV panel costs are still high, but there has been an improvement over the previous year; 2) chip contribution profit was about 0.15 billion, a slight increase over the previous year; 3) short-term losses due to active contraction of the networking business and relocation of the Ruigu factory had a significant impact on profits in a single quarter. In addition, income tax and exchange are expected to have an impact of about 30 million and 20 million, respectively.

Investment advice: maintain a “buy”

Our point of view:

The TV ODM business is tied to major North American customers, and the basic shipping market is stable; the integrated layout of the LED industry chain has entered a harvest period and is expected to continue to contribute to performance flexibility.

Profit forecast: We have adjusted the profit forecast. We expect the company's revenue for 2024-2026 to 21.7/25.1/28.5 billion yuan (previous value 21.4/25.2/29 billion yuan), +26%/+13% year over year, 1.8/2.1/2.5 billion yuan (previous value 2.2/2.6/3.1 billion), +11%/+16% year over year; corresponding to PE 14/11/10X, maintaining a “buy” rating.

Risk warning:

Export sentiment has fluctuated, raw material costs have changed drastically, and industry competition has intensified.