Core views

Positive factors such as the volume of 2024Q3 durable electronic solutions drove the company's revenue growth of more than 40% year-on-year in a single quarter; continuous optimization of the product structure made the company's gross margin exceed 60% in a single quarter, a record high. The increase in both revenue and gross margin enabled the company's net profit side to be fully released and ushered in an inflection point in performance. Looking ahead to 2024Q4 and the long term, high-end product iteration is still the foundation for achieving excessive growth; after 1 year of cultivation, the company's 13 GHz high-end oscilloscope is expected to enter the volumetric phase, which is expected to drive a steady improvement in the company's business performance.

occurrences

In the first three quarters of 2024, the company achieved revenue of 0.535 billion yuan, +13.14% year on year; net profit to mother of 60.1347 million yuan, -11.65% year over year; net profit after deducting non-return to mother 22.2096 million yuan, -26.96% year over year. In the third quarter of 2024, revenue was 0.228 billion yuan, +40.80% year over year; net profit to mother was 52.4894 million yuan, +138.42% year over year; net profit after deducting non-return to mother was 40.457 million yuan, +482.30% year over year.

Brief review

1. 2024Q3's revenue in a single quarter reached a record high, and high-end products+refinement continued to advance, and the company's revenue in the single quarter reached a record high in 2024Q3, and net profit was fully released, mainly due to the rapid expansion of the Endurance Electronic Solutions business, and the high-end superposition oscilloscope process continued to advance. Revenue from dismantling 2024Q3 increased by about 65.99 million yuan. Among them, revenue from solutions (mainly durable electronics) contributed 30.5645 million yuan, order amount of 26.2871 million yuan for 2024Q2 already shipped but unconfirmed revenue, and the remaining 9.1393 million yuan is expected to benefit from the continued high-end and refinement of the company's oscilloscopes, contributing a net increase while replacing old products.

High-end and boutique oscilloscopes continue to advance. 1) Self-developed platform: The 2024Q3 accounts for 89% of sales of digital oscilloscope products equipped with the company's self-developed core technology platform, accounting for an increase of 13.50 pcts over the same period last year. 2) DHO: 2024Q3's DHO series 12bit high-resolution digital oscilloscope revenue increased 71.21% year over year. 3) High-end: 2024Q3's high-end digital oscilloscope (bandwidth ≥2 GHz) revenue increased 144.93% year on year, accounting for 41.83% of total digital oscilloscope revenue, accounting for an increase of 18.45 pct year on year.

2. 2024Q3's gross margin in a single quarter exceeded 60% for the first time, and net profit began to be fully released in the first three quarters of 2024. Among them, the gross margin for the 2024Q3 single quarter increased 2.6 pct to 60.84% year on year, breaking 60% for the first time to reach a record high, mainly due to the volume of durable high-margin solution business, superimposed on oscilloscope product structure optimization. The gross margin of the 2024Q3 digital oscilloscope increased by 1.12 pct to 61.28% year on year, mainly due to the influence of high-end and self-developed core technology platforms on the gross margin of digital oscilloscopes.

In the first three quarters of 2024, the company's expense ratio increased by 7.93 pct to 57.47% year on year; among them, the sales expense ratio decreased by 3.27 pct to 13.94% year on year, mainly due to initial scale effects; the management cost ratio increased by 3.91 pct to 14.12% year on year, and the R&D cost ratio increased 5.57 pct to 27.80% year on year, mainly due to increased investment in personnel, materials, equipment, etc. at R&D centers in Xi'an and Shanghai; the financial cost ratio increased 1.71 pct to 1.60% year on year. In the first three quarters of 2024, the company's net interest rate fell 3.15 pct year on year to 11.24%; among them, the net profit margin for the 2024Q3 single quarter increased sharply by 6.18 pct to 19.79% year on year, close to a record high, mainly due to increases in revenue and gross margin in a single quarter.

3. The overseas Malaysian base achieved the first batch, and the domestic 13 GHz oscilloscope is expected to continue to be released ① Overseas production capacity construction continues to advance: In May 2024, the Malaysian production base achieved the first shipment to overseas customers. In the future, the company will further optimize the production capacity structure and establish an annual production capacity of 0.08 million electronic measuring instruments as soon as possible to meet the development needs of overseas markets. ② New product launch: In August 2024, the company held a summer product launch conference to release the DHO 5000 series high-resolution digital oscilloscope and the DG5000Pro series function/arbitrary waveform generator. Among them, the DHO5000 series oscilloscope supports 8 channel input, 1 GHz bandwidth, and 12 bit resolution. It is an alternative product with outstanding comprehensive indicators. It is expected to continue the growth trend of the DHO 800/ 900 and contribute a net increase while replacing old products. ③ The 13 GHz oscilloscope is expected to be released: The company first released the DS80000 series oscilloscope in September 2023. The maximum bandwidth of 13 GHz entered the international high-end oscilloscope queue, and has leading technical advantages and core technical barriers in the domestic industry. After more than 1 year of prototype testing and product development, it is expected that the product has gradually entered the release stage, which is expected to fully help the company grow.

Investment advice: Taking into account the 100% merger of Endurance Electronics and the company's endogenous growth, we expect the company to achieve revenue of 8.20.1, 0.974, and 1.147 billion yuan respectively in 2024-2026, and net profit to mother of 0.117, 0.174, and 0.208 billion yuan, respectively, with year-on-year changes of +8.35%, +48.61%, and +19.72%, respectively, corresponding to the 2024-2026 dynamic PE of 60.01, 40.38, and 33.73 times, respectively. Maintain a “buy” rating.

Risk analysis

1) High-end product progress falls short of expectations

Since domestic companies started late in the field of general electronic testing and measurement, technology accumulation time is short, and there is still a big gap with foreign dominant companies in terms of product layout and technology accumulation, and the product structure is mainly concentrated in the middle and low end. If the company is unable to launch high-end products as expected or sales of the high-end products already launched fall short of expectations, it will affect the company's core competitiveness, which in turn will adversely affect the company's profitability.

2) Risk of dependency on imports of electronic components

The design and processing level of electronic components directly affect the performance of the company's products. Some high-end electronic components in the company's raw materials, such as IC chips and high-precision resistors, require the use of imported products, and there are few domestic products with equivalent performance that can be replaced. If there are major adverse changes in the international trade environment, or if the production capacity of foreign manufacturers is limited, the company will face the risk of a shortage in the supply of raw materials or fluctuations in procurement prices.