Revenue increased 22% year over year in the first three quarters, and hit a quarterly high in the third quarter. In the first three quarters of 2024, the company achieved revenue of 0.707 billion yuan (YoY +21.95%), net profit attributable to mother of 77.24 million yuan (YoY +28.68%), deducting net profit of 6670 yuan (YoY +63.23%), and net profit increased by 0.7 pct to 10.72%. Among them, 3Q24 achieved revenue of 0.254 billion yuan (YoY +29.78%, QoQ +1.60%), realized net profit of 33.31 million yuan (YoY +178.81%, QoQ +65.59%), net profit after deducting non-return to mother of 21.24 million yuan (YoY +176.84%, QoQ -27.85%), and a net margin of 13.09% (YoY +7.3pct, QoQ +5.3pct).

Gross margin declined slightly year-on-year in the third quarter, and increased month-on-month. The company's gross margin for the first three quarters of 2024 was 36.89%, down 1.76pct from the same period last year. Of these, 3Q24 gross margin was 37.61%, down 0.5 pct year on year, up 1.3 pct from month to month. In terms of expenses during the period, R&D expenses increased by 12.59% to 0.164 billion yuan in the first three quarters, and R&D rates decreased by 1.9 pct to 23.16% year over year; management rates, sales rates, and financial rates decreased by 0.8 pct, 0.9 pct, and 0.4 pct to 3.61%, 2.22%, and -0.81%, respectively. Among them, the 3Q24 R&D rate and management rate decreased year-on-year, and sales rates and financial rates both declined month-on-month. The total rate rate for the four periods decreased 7.5 pct year over year, and increased 2.9 pct month-on-month.

Various products in the server field have been mass-produced, and DrMOS and digital multiphase controllers have been verified on clients one after another. The company has always been guided by market demand and driven by innovation, actively develops new products, and has developed and mass-produced three application series product lines, including household appliances, standard power supplies, and industrial control power, with more than 1,700 effective product models. Low-side driver chips, half-bridge high-power driver chips, and high-voltage primary power supply chips have been mass-produced in the server market; key investments in DrMOS and digital multiphase controllers have been verified on the client side one after another, and the results are comparable to the efficiency of current mainstream consumer products with the same specifications. In addition, the company has launched samples of related series such as eFuse and POL, and will continue to promote the medium- to long-term strategic layout of innovative power chip products and solutions for a full range of high voltage primary power supplies to medium- and low-voltage secondary/tertiary power supplies.

Investment advice: Product types and downstream applications are expanding smoothly, and maintaining the “superior to market” rating. As R&D investment is still increasing, we slightly lowered net profit to mother in 2024-2026 to 0.123/0.169/0.224 billion yuan (previous value 0.127/0.19/0.234 billion yuan), and the PE corresponding to the stock price on October 25, 2024 was 46/34/26x, respectively. The company's product range and downstream applications are expanding smoothly, maintaining a “superior to the market” rating.

Risk warning: New product development falls short of expectations; customer verification falls short of expectations; demand falls short of expectations.