Incident: The company disclosed its 2024 three-quarter report: revenue for the first three quarters of 2024 was 19.352 billion yuan, +36.75%; net profit to mother was 2.234 billion yuan, +39.89% year over year; net profit without return to mother was 2.023 billion yuan, +34.83% year over year.

2024Q3 has steady business performance, new customers, and continuous breakthroughs in new production capacity. According to the company's announcement, the first three quarters of 2024 achieved revenue of 19.352 billion yuan, +36.75% year over year, of which the company's revenue in 2024Q3 was 7.13 billion yuan, +42.86% year over year and +9.13% month over month. The company achieved net profit of 2.234 billion yuan in the first three quarters of 2024, of which the 2024Q3 net profit was 0.778 billion yuan, +54.63% year over month, and -4.07% month on month; in the first three quarters of 2024, net profit without return to mother was 2.023 billion yuan, +834.3% year over year, of which the 2024Q3 company reduced net profit of 0.727 billion yuan, +53.80% year-on-year and +3.93% month-on-month.

The company's revenue reached a record high. We analyzed the reasons as follows:

1) Key customers: ① Tesla 2024Q3 delivered 0.4629 million vehicles, +6.40% year over month, +4.26% month over month. Launched with Tesla's new models in 2025, we expect sales to increase year-on-year in 2025; ② Celis 2024Q3 achieved sales 0.1116 million units, +603.53% year over year, +11.36% month-on-month. As new models are launched and launched in the future, we expect Cyrus sales to continue to grow; ③ Geely 2024Q3 will achieve sales volume 0.534 million vehicles, +15.77% YoY, +11.24% month-on-month. We are optimistic that the new energy models under the ZEEKR, Lynk, and Galaxy brands will be launched one after another, driving Geely's new energy penetration rate and sales growth; 2) Overseas business: The company's Mexican plant is progressing rapidly, with an interior factory officially put into operation in September 2024, and the heat pump assembly products for the thermal management plant were officially mass-produced in August 2024. As of October, 20,000 units were discontinued, with an annual production capacity of 300,000 units. European market development is progressing smoothly. The company received a global project order from BMW during the reporting period for the ball-hinged forged aluminum control arm project, which is the core component of the lightweight chassis. Plans for the second phase of the Polish plant are being stepped up to lay the foundation for more orders from Europe; 3) Others: Exchange revenue for the first three quarters of 2024 was 0.025 billion yuan, of which the company earned 5.44 million yuan in exchange in 2024Q3.

In terms of profit, the company's gross margin reached 20.88% in 2024Q3, -1.78pct year on year, +0.48pct; in terms of expenses, 2024Q3's R&D expenses reached 0.327 billion yuan, +27.12% year-on-year, corresponding R&D expenditure ratio -0.57pct to 4.58% year on year; 2024Q3 sales expense ratio, management fee rate, and financial expense ratio were -0.13pct, -0.95pct, and -1.11pct to 1.13%, 2.23%, and 0.63% year-on-year, respectively.

Platform tier 0.5 refers to the world's leading auto parts industry. Customer +: The strategy binds Tesla and new car builders to enter the global supply system. In the smart electric era, relying on the core competitiveness formed by the company QSTP, we have established stable cooperative relationships with international and domestic innovative car companies and major traditional automakers. Currently, the strategy is tied to Tesla, starting a new round of growth, and has also entered global supply systems such as Ford, FCA, LUCID, Daimler, BMW, Volkswagen, Audi, Honda, and Toyota. In line with the electric intelligence transformation of the industry, the company actively cooperates with leading new car builders such as RIVIAN, NIO, Xiaopeng, Ideal, BYD, Geely New Energy, and Cyrus to explore Tier 0.5 cooperation models to provide customers with simultaneous R&D and supply services for the entire product line. The international strategy continues to accelerate. Furthermore, the company's automotive electronics business ushered in a harvest period. Projects such as closed air suspension systems, intelligent braking systems IBS, electric steering systems EPS, and smart electric door systems were gradually mass-produced and implemented, making an important contribution to the “development of technology.”

Product +: Eight product lines to build a platform-based enterprise. The company's Tier 0.5 innovative business model continues to develop rapidly. The bike support value for leading smart electric vehicle companies continues to rise. It now has 8 series of products: automotive NVH shock absorption systems, interior and exterior systems, lightweight body, smart cockpit components, thermal management systems, chassis systems, air suspension systems, intelligent driving systems, and has one-stop solution capabilities for wire-controlled chassis, complete thermal management modules and self-developed and self-developed core components. The bicycle support amount has reached 0.03 million yuan and has room for continuous expansion.

Actively lay out robots to embody a sea of intelligent stars. Tesla Bot can use smart car chips, computing power, and algorithms to improve perception, decision-making, and control capabilities, while sharing development costs and reducing costs by reusing the car-side supply chain. Under the pangasius effect, the robot industry is expected to develop in the smart electric vehicle industry, and qualitative changes brought about by mature technology and lower costs will drive the full penetration of humanoid robots. Motion actuators are one of the core components of robots. The robot linear actuator and rotary actuator developed by the company have been sent samples to customers many times and have been recognized and praised by customers. According to the company's 2023 annual report, the company will iteratively upgrade and enter mass production as soon as possible according to customer needs. On January 4, 2024, the company announced that it plans to invest 5 billion yuan (including 3 billion yuan in fixed assets) and plan to use 300 acres of land for the robot electric drive system R&D and production base project. On January 8, 2 electric drive system production lines will be put into operation, with an annual production capacity of 0.3 million sets of electric drive actuators, and planning and design for additional production capacity has begun.

Investment advice: The company is a high-performing and flexible target in Tesla's industry chain. With industry-leading customer development and product development capabilities, it is expected to emerge as a leader in autonomous components under the transformation of electric intelligence; currently, robot production capacity is gradually being built, and it is expected to gradually contribute to growth in new business fields. I am optimistic about the changes in the company's major customer needs and the growth of lightweight, intelligent driving systems, thermal management systems, and robot actuator businesses, as well as the increase in profit margins driven by scale effects. We expect the company's revenue for 2024-2026 to be 27.505/35.098/44.177 billion yuan, net profit to mother of 2.969/3.945/4.935 billion yuan, corresponding EPS of 1.76/2.34/2.93 yuan, corresponding to the closing price of 46.39 yuan/share on October 28, 2024, PE is 26/20/16 times, respectively, maintaining the “recommended” rating.

Risk warning: Tesla's sales fall short of expectations; robot business progress falls short of expectations; competition intensifies; raw material costs rise, etc.