Event Overview: The company released its 2024 three-quarter report. With 2024Q1-Q3, the company achieved revenue of 1.075 billion yuan, an increase of 13.5% year on year; net profit to mother was 0.139 billion yuan, up 1% year on year; net profit after deducting non-return to mother was 0.136 billion yuan, up 10.4% year on year. With 2024Q3, the company achieved revenue of 0.367 billion yuan, a year-on-year decrease of 1.5% and a 2.7% month-on-month increase; net profit to mother of 0.045 billion yuan, a year-on-year decrease of 20.7% and a month-on-month increase of 4.7%; after deducting net profit of 0.044 billion yuan, a year-on-year decrease of 10.8% and a 3.9% month-on-month increase.

Comment: Gross margin remained stable, and expenses increased a lot during the period

① Gross profit margin: 2024Q1-Q3, the company's gross margin was 25.14%, down 0.07 pct year on year; in Q3, the company's gross margin was 25.16%, up 0.3 pct year on year, down 0.03 pct month on month.

② #期间费用：2024Q1 -Q3, the company's three fees+research expenses totaled 0.117 billion yuan, an increase of 0.027 billion yuan; in Q3, the company's three fees+research expenses were 0.04 billion yuan, an increase of 0.009 billion yuan over the previous year, a year-on-year decrease of 0.003 billion yuan.

Future core focus: Strong product competitiveness, high quality customer resources ① Active R&D and innovation, strong product competitiveness. Through independent R&D and process accumulation, the company has mastered core technologies such as intergranular oxide control technology in the core process fields of precision cold rolling and heat treatment to achieve import substitution. Compared with Wells, one of the world's largest precision stamping metal materials companies, the technical indicators (yield strength, tensile strength, hardness) of common grade products such as 16MnCr5 and 42CrMo4 alloy structural steel, C45E carbon structural steel, and 51CrV4 special purpose steel are all at a similar level. In addition, the company and Baosteel Co., Ltd. have established a joint studio to jointly conduct research on the application technology of fine blanking materials for automotive parts.

② Master high-quality customer resources and actively explore overseas markets. The company has established long-term stable cooperative relationships with Schaeffler, Mubel, Magna, Faurecia and many other well-known domestic and foreign auto parts suppliers. In emerging application fields, the company has now entered the core customer industry chain in the bearing field, and is also actively exploring emerging application fields such as core component materials, sensor materials, and hydrogen energy core equipment materials for humanoid robots. In terms of market development, while benefiting from the dividends of increased demand in the domestic market, the company is actively developing overseas markets, and has now achieved coverage of overseas production bases for many international customers.

③ Seize demand to release opportunities and actively expand production capacity. In 2023, the company's production capacity was 0.16 million tons, and the production capacity scale is in the first tier of the domestic industry. The new Anhui plant project is expected to be completed by the end of 2024 and officially put into operation in 2025. It is expected to release 0.04 million tons of production capacity that year. In the long run, the two plants in Anhui and Suzhou will be able to provide a total production capacity of 0.3 million tons.

Investment suggestions: The future production capacity of Xianglou New Materials will be further increased, the product structure will be optimized, and the operation is steady. We expect the company's net profit to be 2.00, 2.31, and 297 million yuan respectively in 2024-2026, corresponding to the current price. PE is 22/19/15 times, respectively, maintaining the “recommended” rating.

Risk warning: the risk of raw material price fluctuations, the risk of industry cycle fluctuations, and the risk of high supplier concentration.