The company disclosed its report for the third quarter of 2024. The company achieved revenue of 0.764 billion yuan in the first three quarters of 2024, an increase of 12.70% year on year; net profit to mother 0.149 billion yuan, up 61.20% year on year; after deducting non-net profit of 0.131 billion yuan, an increase of 43.74% year on year; and basic earnings per share of 0.85 yuan.

Performance is growing steadily, and the missile (rocket) solid engine power module business is growing rapidly. According to Guoke Military's report for the third quarter of 2024, it achieved revenue of 0.764 billion yuan, a year-on-year increase of 12.70%, a year-on-year increase of 0.149 billion yuan, a year-on-year increase of 61.20%, after deducting non-return net profit of 0.131 billion yuan, an increase of 43.74%; in the third quarter, the company's revenue was 0.282 billion yuan, an increase of 1.40% year-on-year, and net profit to mother of 69.598 million yuan, an increase of 41.11% year-on-year, net profit of 54.9804 million yuan, an increase of 12.94%. The company's profitability continued to increase during the reporting period, benefiting from the rapid increase in revenue from missile (rocket) solid engine power modules, increased cash management revenue, and lower interest expenses.

Gross margin has been growing steadily, and investment in R&D has been increased. The company's gross sales margin during the period was 37.25%, up 3.01 pct from last year. Sales expenses were $12.19 million, up 28.91% year over year. Management costs were $56.56 million, up 12.18% year over year. Financial expenses - -15.01 million yuan, a significant year-on-year decrease. R&D expenses were 66.2 million yuan, an increase of 42.67% over the previous year. This is mainly due to the company's continuous increase in R&D investment in core products, further increasing investment in research on missile (rocket) solid engine power modules, intelligent new ammunition equipment, and individual weapon systems, while strengthening the introduction of high-level R&D personnel, and the subsequent increase in R&D remuneration.

Investments in the field of power modules and aerospace power may be rewarded. The company expects to invest 0.81 billion yuan in the “Power Module Capacity Building Project”. The implementation of this project will further improve R&D and production conditions and related equipment and facilities, and enhance the scientific research and production capacity of engine power modules. The company plans to invest 0.34 billion yuan for aerospace power research and development centers and supporting shell capacity building to help the company transform into the field of aerospace engine assembly.

We believe that the company's related layout may usher in a rapid explosion of performance as the industry recovers.

Profit forecast: The company's revenue for 2024/2025/2026 is expected to be 1.289, 1.621, 2.027 billion yuan, and corresponding net profit of 0.189, 0.243, and 0.303 billion yuan, corresponding to a valuation of 55/43/34 times, maintaining a “highly recommended” rating.

Risk warning: new product development risk, military order decline risk, military pricing model risk.