Incident: The company released its three-quarter report for 2024. The company achieved operating income of 3.15 billion yuan in the first three quarters, an increase of 18.31% over the previous year, and achieved net profit of 0.483 billion yuan to mother, an increase of 24.94% over the previous year.

Key points of investment

Both revenue and profit increased, and profitability increased markedly: The company's revenue and profit performance in the first three quarters of 2024 was steady, with revenue reaching 3.15 billion yuan, up 18.31% year on year, showing an increase in the company's sales performance in the first three quarters. Net profit to mother was 0.483 billion yuan in the first three quarters, up 24.94% year on year. The year-on-year increase exceeded the growth rate of operating income, indicating that the company's profitability had increased. These data reflect improvements in the company's operating efficiency and profitability in the first three quarters. Among them, the third quarter of 2024 achieved operating income of 1.128 billion yuan, an increase of 28.46% over the previous year, and realized net profit of 0.259 billion yuan to mother, a sharp increase of 100.35% over the previous year. Furthermore, in the third quarter, gross sales margin reached 54.11%, and net sales margin reached 18.91%. Both increased year-on-year, and the company's profitability increased.

Net cash flow from operating activities improved year-on-year, and the steady increase in R&D investment yielded significant results:

The company's net cash flow from operating activities increased 25.26% year-on-year to 0.182 billion yuan in the first three quarters of 2024. This increase was mainly due to increased cash inflows from the company's operating activities. Net cash flow from investing activities was negative and decreased compared to the same period last year, probably due to the company's increased investment in fixed assets, intangible assets, and other long-term assets in the first three quarters. In addition, the company's R&D investment in the first three quarters of 2024 reached 0.575 billion yuan, an increase of 24.52% over the previous year. The company continued to enrich its product line of infrared detector chips, thermal imaging core modules, and infrared thermal imaging machines, achieving product coverage from 8 μm to 6 μm, especially for 6 μm products. The initial sample NETD was less than 50 mK, which indicates the company's technology accumulation in the field of low-cost and miniaturized infrared imaging.

The company's special equipment and civilian markets both grew: the company achieved strong growth in both the special equipment and civilian markets, successfully completed various tasks and launched several projects in the first half of the year. In the civilian sector, the company actively expands the global market and penetrates domestic and foreign markets through marketing networks. As technology matures and markets expand, the company's performance is expected to continue to grow.

Profit forecast and investment rating: The company's performance is in line with expectations. Considering that the company is a leading domestic unrefrigerated infrared chip company, overseas and civilian market demand is expected to continue to grow, we slightly lowered our previous forecast. We expect the company's net profit to be 0.577/0.829/0.988 billion yuan respectively in 2024-2026, with a previous value of 0.684/0.898/1.176 billion yuan. The corresponding PE is 38/27/22 times, maintaining the “buy” rating.

Risk warning: 1) strategic risk; 2) macroeconomic fluctuation risk; 3) industry competition risk; 4) procurement and supply chain management risk.