The company released three quarterly reports: Q3 revenue of 2.648 billion yuan (yoy +37.25%, qoq +20.21%), net profit of 0.178 billion yuan (yoy +53.54%, qoq+ +22.89%). In 2024, Q1-Q3 revenue was 6.841 billion yuan (yoy +42.62%), and net profit to mother was 0.465 billion yuan (yoy +56.20%). Net profit from Q3 is in the upper middle of the 0.163-0.188 billion performance forecast. It is mainly due to increased production schedules from leading customers and high revenue growth driven by increased sales of new products, and increased scale effects and operational efficiency driven the increase in net interest rates. Looking ahead, the company will continue to benefit from the wave of intelligence and accelerate overseas expansion, and we maintain a “buy” rating.

Sales volume of leading customers increased month-on-month, combined with new product release, Q3 revenue +20.21% month-on-month

Q3 domestic passenger car wholesale/retail sales volume was 6.67/5.78 million units, +7%/+14% month-on-month. Among the company's leading customers, such as Great Wall, Chery, Geely, and Cyrus, sales volume was above +10% month-on-month. At the same time, many new projects were mass-produced by customers such as Chery, ZEEKR, and Geely in Q3, which strongly drove Q3's revenue growth month-on-month. At the same time, the company continues to set new targets. 24H2 has been designated for multiple HUD projects from customers such as Chery, BYD, Great Wall, and Krypton, and has received new targets for Stellantis Group platform-based HUD projects.

Q3 Net interest rate increased month-on-month, scale effects continued to be reflected, and ROE reached the highest level in nearly five years

The Q3 gross profit margin was 21.06%, -0.82pct/-0.88pct month-on-month. The slight decrease from month to month was mainly due to the fact that many new projects were still in the early stages of climbing in Q3, and the new Changxing die-casting base was in the early stages of commissioning. The net interest rate for Q3 was 6.77%, +0.70pct/0.14pct, mainly due to: ① The scale effect narrowed the cost rate for the period, the cost rate was 12.65% during the Q3 period, -1.89pct/-1.22pct; ② the company strengthened collaboration in internal sales, R&D, etc., and improved asset operation efficiency. The ROE and ROA in Q3 were 2.88%/1.69% respectively, making ROE the highest in a single quarter since 2020. As new die-casting production capacity climbs and various new products continue to be released, the company's profitability is expected to further increase.

It has grown into a smart cockpit platform enterprise. Intelligent driving and international layout have accelerated. The company has grown into a smart cockpit platform enterprise. Customers continue to expand into leading autonomy and new forces. The proportion of high-margin products has increased, and the scale of superimposed new product categories has helped the company usher in an upward inflection point in performance. In the field of smart driving, the company launched smart driving domain control products based on Horizon and Qualcomm's solutions, and targeted projects are expected to be implemented. In terms of international layout, the company's products such as HUD, screen display, and wireless charging have been supplied or targeted overseas, and is also promoting the planning and construction of overseas production bases.

Profit forecasting and valuation

We maintain our previous forecast. We expect the company's 24-26 revenue to be 9.738/12.058/14.75 billion yuan, and net profit to mother 0.668/0.927/1.226 billion yuan. iFind agreed that the average PE value of comparable companies in 25 years was 22.6 times. Considering that the company's customer structure continues to be optimized for leading new energy customers, the company was given a valuation premium of 15% compared to the average and 26.0 times the 25-year PE, with a target price of 45.84 yuan (previous value 42.68 yuan), maintaining a “buy” rating.

Risk warning: 1) Downstream automobile production and sales or customer expansion fall short of expectations. 2) Automobiles are less intelligent than expected.