Incident: The company announced its three-quarter report. The first three quarters of 2024 achieved revenue of 7.678 billion yuan, a year-on-year increase of 14.70%; net profit to mother of 0.868 billion yuan, an increase of 30.81% year on year; and an increase of 31.35% after deduction.

2024Q3 performed well, with both gross margin and net margin rising year over year. According to the company's three-quarter report, the 2024Q3 single quarter achieved revenue of 2.744 billion yuan, up 8.65% year on year; net profit to mother was 0.309 billion yuan, up 23.57% year on year; net profit after deduction was 0.307 billion yuan, up 24.76% year on year; gross margin was 16.37%, up 0.25 percentage points year on year; and net interest rate was 11.27%, up 1.36 percentage points year on year. According to the company announcement, the main reason for the increase is: 1) Continuous optimization of the product structure, and strong production and sales boosts efficiency. The company has always been guided by the three strategic ideas (high-end market, high-end customers, high value/high contribution rate products), continuously consolidates and strengthens the leading edge of the company's products, and wins the market with high quality, high level of performance and high cost performance. In the first three quarters of 2024, the company's production and sales were strong, customers at home and abroad were strong, the overall sales scale continued to grow, and profitability continued to increase. 2) Technological innovation has achieved remarkable results, and the efficiency gains of the three modernizations are outstanding. The company has always insisted on being driven by technological innovation, continuously increasing investment in R&D, making continuous breakthroughs in the production process and product performance of aluminum heat transfer materials, and product competitiveness continues to increase. In addition, the company has vigorously strengthened benchmarking and tripartite construction between the two regions, and further promoted standardization, standardization and process efficiency through modern digital intelligence methods, increasing efficiency significantly.

Recommended logic and profit forecast: The market believes that the company's growth ceiling is clear, and it is difficult to replicate the absolute advantages of fuel vehicle products to the NEV sector, but we believe: 1) Industry beta: NEV liquid cold plates have higher value, good boom, broad energy storage and air conditioning space, and sufficient market; 2) Company α: high-end (customization), internationalization, upstream layout of raw materials, and downstream tier 1. The competitive pattern of liquid cooling panels in the electric vehicle sector is expected to gradually converge with the fuel vehicle sector in the future. Therefore, we predict that in 2024-2026 the company EPS will gradually converge with the fuel vehicle sector. 1.14, 1.31, 1.52 yuan, PE is 15, 13, 11 times. We use an absolute valuation method, and the value per share based on the FCFE model is 20.10 yuan, maintaining a “buy” rating.

Risk warning: Vehicle sales and electrification rates fall short of expectations, disturbances in raw materials and exchange rates, worsening competition, etc.