The company's revenue for the first three quarters was 6.891 billion yuan (yoy +10.03%), net profit due to mother 0.152 billion yuan (yoy +13.06%), after deducting non-net profit of 95.42 million yuan (yoy +85.09%). Among them, Q3 revenue was 2.591 billion yuan (yoy +9.22%), net profit due to mother was 54.08 million yuan (yoy +36.23%), after deducting non-net profit of 55.15 million yuan (yoy +172.26%). The company's profitability has improved significantly, mainly benefiting from the effective promotion of new intelligent strategies. We believe that along with opportunities in the three major industries of AI intelligence, data valorization, and automobile overseas, the company's business is expected to be upgraded at an accelerated pace. It is expected that profit levels will continue to be optimized throughout the year to maintain “purchases.”

24Q3 deducted non-net profit +172% year-on-year, optimistic that profit will increase throughout the year

The company officially launched a new intelligent strategy in '24, and the quality of business improved markedly. The company's overall gross margin for the first three quarters was 28.15%, -0.72pct year on year, mainly affected by the decline in the third quarter. 24Q3 gross margin was 24.46%, -3.42pct year on year. We believe that as product projects advance, Q4 gross margin is expected to recover, and gross margin is expected to pick up throughout the year. At the same time, the company strengthened cost control. The sales/management/R&D expense ratio for the first three quarters was 5.30%/7.95%/10.04%, -0.53 pct/+0.69 pct/ -0.86 pct year-on-year. We believe that along with the advancement of the new strategy, the company's profit has reached a significant inflection point, and we are optimistic that long-term profitability will increase.

Outlook 1: Focus on the business opportunities of AI intelligence and data value

AI intelligence and data valorization are the company's two key layout directions. 1) AI intelligence: The company has deep accumulation in the fields of medicine (medical records, medical insurance, medical imaging), human society, automobiles, etc., and is expected to unlock new value in traditional business scenarios through large-scale model technology; 2) Data valuing: The data element market construction is accelerating. As the manufacturer with the largest market share of health insurance information systems in China, the company has important card position advantages. Currently, it has cooperated with big data groups in Fujian and other places to empower commercial insurance companies to create a new “data element x healthcare” service model.

Outlook 2: Going overseas+car road cloud, smart car business is expected to expand

Focus on the two major new demand scenarios: going overseas and car road cloud. 1) Going overseas: The company and the TOP5 car manufacturers that export to Europe all have deep cooperation for their mainstream overseas models. It is expected that the annual overseas business will increase the fixed amount growth rate of 70% of 24H1; 2) Car Road Cloud: The company is deeply involved in the drafting of 60 national V2X related standards. The smart car business is expected to accelerate release as the country's “vehicle road cloud integration” construction accelerates.

Investment advice: The target price is 17.92 yuan. Maintaining the “buy” rating, taking into account the smooth progress of the company's business in the first three quarters and maintaining profit forecasts, the company's net profit to mother is expected to be 0.362/0.515/0.647 billion yuan for 24-26, respectively. Using segmented valuation, the net profit of 25E smart cars is 0.235 billion yuan, and the net profit of other businesses is 0.28 billion yuan. Refer to the comparable company's smart car/other business 43.4x/30.0x25PE, consider the company's strategic transformation advantages, and give smart cars/other businesses 50x/35x 25PE respectively, with a target price of 17.92 yuan (previous value of 10.58 yuan) to maintain the “buy” rating.

Risk warning: The progress of the intelligent driving industry falls short of expectations; the promotion of new intelligent strategies falls short of expectations.