The company announced its 2014 three-quarter report, with 24Q1-3 revenue of 9.08 billion +17.1% YoY, +29.1% YoY net profit of 0.904 billion, +20.3% YoY after deducting non-return 0.828 billion, gross profit margin of 23.8% YoY -0.8 pct, and net profit margin of 9.9% yoy +1pcts YoY. Based on the company's recent situation, our review is as follows:

Q3 performance was hampered by exchange rate fluctuations, rising raw material costs, and incentive costs. Q3 revenue 3.21 billion +15.1% month-on-month +2.8%, net profit to mother 0.248 billion -16.8% month-on-month, net profit minus 0.238 billion -16.8% month-on-month -23.2%, gross profit margin 23.3% yoy -3.0pcts -0.2pct, net profit ratio 7.6% yoy -2.7pcts month-on-month -3.1 pcts, period expense ratio 14.0% yoy -1.1pcts month-on-month- 2.5 pcts. The company's Q3 revenue continued to grow, due to the continuous increase in the company's market share in the market segment, and the month-on-month decline in profitability. This is mainly due to: 1) the implementation of the Q2 upstream CCL price increase boosted the company's Q3 raw material costs; 2) after the Q2 industry chain inventory and preparation, the recovery in consumer demand was still weak, and corresponding product prices declined; 3) The cost side increased due to equity incentive costs, exchange rate fluctuations, and verification of high-end products and key customers.

In the short term, the Q4 utilization rate is expected to remain high, and optimization of product structure and material costs is expected to drive profit improvement. Entering Q4, the overall downstream demand remained strong, the company's order volume and operating rate remained at a high level, and the product structure continued to be optimized. Looking at various businesses, orders for new energy vehicles and photovoltaic energy storage are full, and it is hoped to maintain a rapid growth trend; on the AI computing power side, as the company continues to introduce mass production of new products for N customers and the continuous promotion and introduction of domestic customer projects, the increase in the penetration rate of the EGS/Genoa platform is expected to usher in volume growth; consumer electronics business demand is gradually picking up, and the share of HDI/SLP shipments is increasing. The operation of high-end factories in Zhuhai is expected to reverse losses.

The company continues to increase investment in R&D and has achieved breakthroughs in many key areas. 1) In the field of general-purpose servers, the company has achieved stable mass production of high-speed PCBs on the EGS/Genoa platform, and has also made major breakthroughs in product technology such as high-speed PCBs on the Birth stream platform. Compared with the EGS/Genoa platform, the birthstream platform has increased requirements for signal transmission rate, data transmission loss, wiring density, etc., and PCB products need to be iterated simultaneously. This breakthrough will help further expand server products and seize market opportunities for high-end data center products. 2) In the field of AI servers, the company successfully pioneered the application products of soft board and soft and hard board in data centers, and also achieved major breakthroughs in products such as high-end HDI and high-multi-layer PTFE boards. 3) In the field of high-speed communication, the company achieved batch shipment of products such as 800G optical modules and high-end HDI communication modules, and made major technological breakthroughs in 112G switching and routing PCBs. 4) In the field of satellite communication, the company has many leading domestic technologies, and various phased array radar boards and other products can be used in terminals. 5) In the consumer electronics sector, demand for highly integrated, lightweight, bendable, and high heat dissipation products is increasing. The company has accumulated many leading domestic technologies in the fields of flexible folding screen threading boards and camera COB packaging.

Looking at the medium to long term, the company's excellent management and the release of high-end production capacity for automobiles and digital communication have opened up a new round of growth space.

The company's high-end upgrade strategy is progressing steadily. The high-multi-layer, HDI/SLP production capacity project in the field of hard boards is progressing smoothly. High-end product development for leading downstream North American N and domestic H computing power customers, and leading automotive T1 customers such as Bosch and Denso have all made new breakthrough progress. It is hoped that it will continue to receive high-margin orders and drive rapid growth in performance. It is worth noting that the company is cooperating with N customers to develop new projects. Soft boards, hard and soft boards, high-grade HDI, and high-multi-layer PTFE boards are expected to contribute to elastic performance next year. We are optimistic about the company's excellent management capabilities. High-end production capacity upgrades for automobiles and digital communication will open up room for medium- to long-term performance and valuation.

Maintain a “Highly Recommended” rating. Taking into account the short-term Q3 performance declined due to multiple factors. In the medium to long term, the company has a wide range of downstream applications, excellent technology and customer cards, continuous introduction and release of products in the automotive and digital communication fields, and continuous release of high-end production capacity. We maintain our forecast 24-26 revenue of 12.59/14.47/16.65 billion, and net profit of the revised mother to 1.22/1.52/1.84 billion. The corresponding EPS was 1.30/1.63/1.98 yuan, and the corresponding PE was 21.6/17.3/ 14.2x, maintaining a “Highly Recommended” rating.

Risk warning: Industry demand falls short of expectations, competition among peers is intensifying, capacity release progress falls short of expectations, raw materials are at risk of rising, and exchange rate fluctuations cause exchange losses.