Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 1.46 billion yuan, an increase of 42.17%; the profit side realized net profit of 0.251 billion yuan, an increase of 188.08% over the previous year; and realized net profit without deduction of 0.231 billion yuan, an increase of 237.99% over the previous year. Q3 achieved operating income of 0.54 billion yuan, an increase of 49.96% year on year; realized net profit of 0.099 billion yuan, an increase of 340.17% year on year; realized net profit deducted from mother 0.085 billion yuan, an increase of 492.15% year on year.

New customers continue to be developed, and new products are gradually being added: as the company's S, C, P, and H series new product matrices continue to improve and target new market application fields, and in the context of the continuous strengthening of the company's global brand influence, broad support from the developer community, and the improvement of the competitive environment in the industry, the company continues to develop potential customers, and downstream customer projects are gradually entering the expansion stage. New products such as S3, C2, and C3 continue the rapid growth trend, and new products such as the C6, P4, and H series are expected to gradually contribute to increased performance.

The incremental market continues to penetrate: Smart homes and consumer electronics are the basic business segments of the company. The growth rate is expected to be 30-35% this year. At the same time, the Internet of Things penetration rate in the company's other non-home industries has begun to increase, showing a high growth trend in the fields of energy management, tools and equipment, and general health.

2D2B software and hardware ecological barriers have been further strengthened: As an IoT technology ecosystem company, the company has an industry-leading developer software and hardware ecosystem. As of 3Q24, the company's GitHub ESP 32 projects had accumulated 0.0758 million, and the number of Reddit ESP 32 team members reached 0.095 million. The company extended M5 Stack and collaborated to develop industrial, educational and developer markets, continue to strengthen the company's hardware product matrix, and further strengthen the 2D2B software and hardware ecosystem barriers.

Investment proposal: The company is expected to achieve revenue of 2.053/2.665/3.429 billion yuan in 2024-2026, and is expected to achieve net profit of 0.349/0.47/0.667 billion yuan. Corresponding PE was 43.26/32.15/22.65 times, respectively, maintaining the “gain” rating

Risk warning: Risk of technology iteration falling short of expectations, risk of downstream demand falling short of expectations, risk of increased market competition, and risk of rising costs.