Incidents:

The company released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 0.535 billion yuan, up 13.14% year on year, and achieved net profit of 0.06 billion yuan, down 11.65% year on year; in the Q3 single quarter, the company achieved revenue of 0.228 billion yuan, up 40.80% year on year, and achieved net profit of 0.052 billion yuan, up 138.42% year on year. Comments on this are as follows:

All major product lines have exploded, and Q3 revenue has increased dramatically. In the third quarter of 2024, sales of digital oscilloscope products equipped with the company's self-developed core technology platform accounted for 89.00%, up 13.50 pcts year on year; sales revenue of DHO series high resolution digital oscilloscope (12 bit vertical resolution) increased 71.21% year on year; sales revenue of high-end digital oscilloscope products (bandwidth ≥2 GHz) increased 144.93% year on year, accounting for 41.83% of total digital oscilloscope sales revenue, up 18.45 pcts year on year; sales revenue of the solution was 30.5645 million yuan. The proportion of products on the company's self-developed platform continues to rise, the number of new high-end products is remarkable, and the growth logic is gradually being implemented.

The increase in gross margin was compounded by a decrease in the expense ratio during the period, and the net margin increased significantly in Q3. In the third quarter of 2024, the company's gross margin reached 60.84%, up 2.60 pct year on year and 2.37 pct month on month. Among them, the gross margin of digital oscilloscope products was 61.28%, up 1.12 pct year on year, and 3.19 pct month-on-month. The company's high-end and self-developed core technology platforms significantly drove the gross margin of digital oscilloscope products, driving the company's overall gross margin to further increase. With the company's revenue growing significantly in Q3, expenses were effectively diluted during the period, and the total R&D, sales, and management expenses ratio of the Q3 company decreased by 4.06 pct year-on-year. The increase in gross margin and the decline in the period expense ratio led to a significant improvement in the company's profitability. The Q3 net margin reached 19.79%, an increase of 6.18 pcts over the previous year, and an increase of 16.24 pcts over the previous year.

The merger and acquisition of Endurance Electronics has been implemented, and its comprehensive strength has been further enhanced. On August 20, the company issued the “Notice Concerning the Completion of Asset Transfer for Issuance of Shares to Purchase Assets and Raise Supporting Funds”. The company completed the acquisition of the remaining 67.7419% of the shares of Endurance Electronics and achieved 100% ownership. Endurance Electronics focuses on the development and application of intelligent digital array systems. As a customized solution provider for electronic measuring instruments, it has strong synergy and complementarity with the company in terms of business, and has brought considerable performance contributions after the third quarter merger. Furthermore, Endurance Electronics can share the company's marketing network and office production space, which is expected to further reduce the company's sales and management expenses.

Profit forecast: The company's net profit for 2024-2026 is expected to be $1.15, 1.69, and 228 million yuan, respectively, with corresponding PE values of 61, 41, and 31 times, maintaining an “incremental” rating.

Risk warning: New product promotion progress falls short of expectations; profit forecasting and valuation models fail