The company released its three-quarter report. 24Q1-3 revenue of 3.18 billion increased 33.0% year over year, net profit to mother of 0.187 billion, loss of 0.018 billion in the same period last year, and net profit of 0.178 billion yuan of non-return net profit lost 0.027 billion in the same period last year. Gross profit margin 21.7% yoy +5.5pcts, net profit margin 5.9% yoy +6.6pcts. The reviews are as follows:

The Q3 performance exceeded market expectations, and profitability further improved. Q3 revenue 1.21 billion +49.3% month-on-month, +10.8% month-on-month net profit 0.09 billion, +30.0% month-on-month, net profit minus 0.087 billion +389.2% month-on-month +31.3% month-on-month. The revenue side achieved rapid year-on-month growth, and the profit side accelerated release, indicating a significant increase in the share of high-end product shipments related to the company's computing power. The gross profit margin was 24.9% yoy +10.8pcts month-on-month, and the net profit margin was 7.5% yoy +10.9pcts month-on-month, with a significant increase in profitability. We think it is mainly due to the company's continuous adjustment of production capacity to meet the demand of the computing power market, the share of AI server shipments has increased rapidly, and actively reduced the number of orders for low gross profit products.

Progress in various business areas: 1) Network communication sector: In the communications sector, the company has stepped up new customer development efforts, continuously optimized the product structure, and mitigated the decline in demand in the communications field. In the network sector, PCBs related to the company's 800G high-speed switches have been certified by many important customers, and batch orders have been obtained one after another.

Currently, the company is working closely with customers to actively promote the development of next-generation 224G products; 2) Servers:

At present, the company's AI server PCBs have been delivered in large quantities to multiple customers, and the market share of 24Q1-3 servers has increased by 20.87 pcts year over year; 3) Automotive electronics: The company continues to strengthen cooperation with global automotive electronics and electric vehicle industry leaders, and has successfully developed related products in key technology sectors such as autonomous driving, smart cockpits, and power energy; 4) Low-orbit satellites: The company is currently actively developing related process technology to cooperate with many customers in developing related products.

Q4 operations are still expected to maintain a positive trend. Today and next year, the company is expected to accumulate and develop heavily on communication networks, AI servers, and automotive electronics, and return to a rapid growth path. In the short term, the company's Q4 operations are still expected to maintain a positive trend. The product structure continues to be optimized along with the volume of computing power orders, and the performance is expected to reach new highs. In the medium to long term, in the field of high-end communication network equipment, the company continues to actively cooperate with leading customers to develop PCB products in application fields such as 5.5G&6G/satellite communication/800G switches/optical modules, and is expected to increase the unit price of the product over 24 years; in the server field, the company continues to optimize the server product structure and focus on AI server product development. It has developed many server customers including Amazon, and AI-enabled motherboards and accelerator card products have been mass-produced. In '24, with the release of production capacity in Dongcheng Phase IV, AI product revenue is expected to continue to expand; In the field of automotive electronics, the company continues to increase investment in dedicated automobile lines, and continues to develop more new technologies in segments such as intelligent driving/power energy/smart cockpit. With the increase in production capacity in Ji'an and Dongcheng and the introduction of batch orders from more new customers, the scale continues to grow rapidly. In summary, along with the continuous increase in global computing power demand, domestic data center expansion, demand for high-computing power servers, and new platform upgrades, etc., the three-phase automotive trend is evolving at an accelerated pace, and the company hopes to continue to benefit from the rapid development of segments and the dividends of new production capacity.

Investment advice: The company has been deeply involved in communication networks, HPC, and automotive electronics circuits for many years. It has mainstream customer resources and has strong core competitiveness. With the continuous release of new production capacity, the company will continue to benefit from the three main business lines in the long term and return to a rapid growth path. Considering that the company's Q3 exceeded expectations and the growth potential brought by the future customer product layout in the computing power market, we upgraded the company's 24-26 revenue to 4.58/6.42/8.34 billion, and net profit to mother to 0.28/0.7/1.01 billion, corresponding to PE 93.3/37.5/26.0 times, maintaining an “increase” investment rating.

Risk warning: Prices of upstream raw materials fluctuate; customer development falls short of expectations; downstream demand falls short of expectations; new production capacity falls short of expectations; industry competition intensifies.