Incident: The company released its report for the third quarter of 2024. In the first three quarters, the company achieved operating income of 22.45 billion yuan, a year-on-year increase of 0.77%; realized net profit to mother of 2.545 billion yuan, a year-on-year decrease of 1.74%; and realized net profit deducted from non-mother of 2.261 billion yuan, a year-on-year decrease of 5.87%.

Q3 The main business is under pressure, and foreign exchange affects profit performance in a single quarter. The company achieved revenue of 7.583 billion yuan in a single quarter, yoy -0.8%, qoq -12.69%, realized net profit of 0.735 billion yuan, yoy +19.75%, qoq -41.10%, realized net profit without return to mother 0.499 billion yuan, yoy -22.91%, qoq -60.41%, gross profit margin of 39.90% in the single quarter, yoy-2.37 pct, qoq-0.93 pct; in terms of expenses, Q3 single-quarter R&D, The sales and management expenses rates were 14%, 16.5%, and 3.7%, respectively, +2.8 pcts, 3 pcts, 0.6 pcts compared to the previous month, 1.8 pcts, 0.3 pcts, and -0.1 pcts. In terms of exchange, the company had a small exchange loss in the third quarter. There was a lot of profit and loss in the same period last year, which affected profit performance.

The bottom of the G-end stabilized, and the innovative business continued to improve. The company's overall overseas business recovery was good, hedging the pressure on the main domestic business, and government business stabilized during the performance period. Among them, the emergency sector in the field of social governance and digital upgrading in the major transportation sector were driven by the project. The B-side showed slight pressure. Real estate construction continued to be sluggish, leading the growth rate in manufacturing, energy, electricity, etc., and demand for innovative business continued to improve. Furthermore, the fiscal policy press conference of the Ministry of Finance of the New State Office on Saturday, October 12 indicated that in the near future, efforts will be made to support local efforts to resolve government debt risks, increase debt amounts on a large scale, and support local resolution of hidden debts. As of the third quarter, the company reported 0.608 billion in notes receivable and 17.181 billion in accounts receivable. It is expected that the policy will accelerate repayment and increase profit levels.

Downstream digital transformation continues, and the company is expected to continue to benefit from the wave of AI intelligence. The maturity of the multi-modal large model will bring about an improvement in the company's model capabilities, an increase in intelligent penetration rate, and the upgrading of model generalization capabilities to reduce the cost and efficiency of the solution. Recently, the reasoning capabilities of large overseas models have gradually improved, and AI agents have gradually matured. The company is a leading manufacturer in the field of machine vision. In the future, it is expected to benefit deeply from the downstream wave of intelligence, and there is plenty of room for growth.

Considering macroeconomic uncertainty, we lowered the company's 2024-2026 company performance to 3.3/4/4.8 billion yuan (previously 3.7/4.3/5 billion), and the corresponding PE valuation was 16/14/11 times, respectively, to maintain the “buy” rating.

Risk warning: Industry sentiment falls short of expectations; uncertainty about downstream progress; new product iterations fall short of expectations.