Weir released its three-quarter report, corresponding to 3Q24 revenue of 6.817 billion yuan (yoy +10%, qoq +6%), gross profit margin of 30.4% (yoy+8.7pp, qoq+0.2pp), net profit of 1.01 billion yuan (yoy +368%, qoq +25%), net profit of 0.92 billion yuan (yoy +341%, qoq +14%). 3Q24 Non-recurring profit and loss is mainly income related to the increase in the fair value of shares held by the company in listed companies and exchange rate hedging. Looking ahead to 25 years, we believe that 1) with the expansion of production capacity, the penetration rate of the company's CIS mobile phone products in Android phone brands will continue to increase, and 2) the revenue of the company's automotive CIS and analog products will continue to grow. Maintain a buy rating.

3Q24 revenue hit the highest level in a single quarter, and profitability continued to improve

The company's revenue for 3Q24 was 6.817 billion yuan, higher than the previous highest level in a single quarter (2Q24 achieved revenue of 6.45 billion yuan). We think it is mainly due to 1) the company's continued growth in revenue from automotive CIS products, leading the shares of Surround View, Cabin, and 1.3/1.7M ADAS. 2) In terms of mobile phones, the high-end CIS product line represented by the OV50H has begun to expand. The company deducted a non-net interest rate of 13.5% in 3Q24 (12.5% in 2Q24), and profitability improved significantly. Mainly due to improvements in the company's product portfolio structure, high-end, high-margin mobile CIS products and automotive CIS products increased their share of revenue. Furthermore, the company's inventory was 6.77 billion yuan, which was roughly the same month on month, in line with the company's sales level. Financial expenses have declined significantly, management expenses and R&D expenses have not changed much, and net operating cash inflows have continued.

24/25: New car products are gradually being shipped, and it is expected that new mobile phone customers will be introduced, and multiple models will be released after production capacity is expanded

We expect automotive CIS to maintain 35% revenue growth in 2024. Looking ahead to 25, the industry is expected to continue to grow as high-end smart driving assembly declines from 25w to 10w/15w models, and the company may continue to benefit from industry trends. We anticipate that automotive PMIC/Serdes/SBC/CAN/LIN will be implemented one after another in 25/26 to generate revenue. In terms of mobile phones, we expect that with the expansion of production in foundries, CIS components such as OV50D/OV50M used in other secondary cameras and periscope cameras are expected to continue to expand and increase revenue. Furthermore, we also expect that in 25/26, with the launch of Meta's consumer-grade AR products, the company, as the core supplier of CIS cameras, may benefit from the gradual introduction of new products.

Maintain the purchase rating and target price of $127

We expect the company's net profit to be 3.24/4.21/5.2 billion yuan in 2024/25/26 (previous value:

3.24/4.21/5.19 billion yuan). Considering that the company's layout is complete, the subsequent profit growth rate may gradually slow down, 36.62 times PE in 2025 (industry average is 44.63 times 2025), corresponding to a target price of 127 yuan, for purchase.

Risk warning: In the global semiconductor downturn cycle, demand for mobile phones, etc. falls short of expectations, and industry competition intensifies.