Incident: The company announced that revenue for the first three quarters of 2024 was 4.208 billion yuan, YoY +137.33%; net profit due to mother was 0.273 billion yuan, reversing losses year on year; net profit not attributable to mother was 0.305 billion yuan. Looking at 24Q3 alone, the company achieved revenue of 1.751 billion yuan, YoY +150.04%, QoQ +8.1%, and the revenue scale was a record quarterly high; net profit to mother was 0.123 billion yuan, YoY +14181.63%; net profit after deducting non-net profit was 0.152 billion yuan, YoY +3642.4%. The company previously disclosed its forecast for the third quarter, and its performance was in line with the forecast range.

Key points of investment:

Security and mobile phone drivers saw a sharp increase in revenue in the first three quarters, and the mobile phone market successfully opened a second curve. According to financial reports, the company's shipments in the three major application fields of smartphones, automotive electronics, and smart security have all achieved high growth rates, which has led to a significant increase in revenue scale. In the field of smart security, the company's newly launched iterative products have better performance and competitiveness. Product sales have increased significantly, and sales revenue have increased significantly. In the smartphone sector, the company's shipments of high-end 50M products used in flagship mobile phone cameras, wide-angle, and telephoto lenses have risen sharply. In particular, mass production of various XS series products has led to a significant increase in revenue in the smartphone sector. At the same time, cooperation with customers has deepened across the board, and the market share continues to increase. At present, it has successfully opened up a second growth curve in the smartphone field.

High-end mobile phone products accelerate large-scale mass production. According to financial reports, the company's mobile CIS products cover the current mainstream demand of 8M-50M in the market and are expected to become the largest main business in 2024. In response to the demand for high-end flagship models, several XS series high-end products for flagship cameras and auxiliary cameras (including telephoto and wide-angle) have been shipped on a large scale. According to the Starway platform information, in 2022, the company launched the SC550XS, the first 50MP ultra-high resolution 1.0 μm pixel size product, and the SC520XS, a 52MP ultra-high resolution 0.7 μm pixel size product. These two products have been mass-produced in 2023. In January 2024, the company launched the SS580XS, the first 50M 1/1.28 inch product, which is the same platform product as the 22nMhKMG Stack. Aiming at the mainstream smartphone CIS market, the company is also developing in-depth technical cooperation with domestic fabs, using technological innovations such as single-chip integration to launch the SC5000CS, a more cost-effective high-resolution product.

According to the company's announcement, high-end 50M products currently account for more than 50% of revenue in the smartphone business.

The performance and competitiveness of new security products have been further improved. According to financial reports, at present, the company continues to make high-end efforts in the field of smart security, and has successfully launched cutting-edge security product portfolios such as the Pro Series full performance upgrade series, the AI Series advanced imaging series, and the SL Series Super Starlight Series to better meet the intelligent stage of security monitoring. The company's machine vision products have been widely used in emerging application fields represented by drones, sweepers, and AR/VR; in industrial CIS, the company has launched a rich product matrix in the three categories of surface arrays, intelligent transportation systems, and linear arrays, covering all kinds of industrial inspection scenarios as well as mainstream industrial intelligence scenarios such as industrial barcode readers, AGV navigation systems, and 3D scanners.

Adjust profit forecasts to maintain a “buy” rating. We adjusted the company's profit forecast, mainly by increasing the company's product shipments and adjusting asset impairment losses. The company's net profit for 2024-2026 is estimated to be 0.39/0.648/0.886 billion yuan (previously 0.382/0.61/0.801 billion yuan), corresponding to PE of 69/42/31X, maintaining the “buy” rating.

Risk warning: customer orders fall short of expectations; industry sentiment falls short of expectations; supply chain risks; possible impact of asset and credit impairment announced by the company on the company's profits