The company achieved revenue of 0.254 billion yuan (yoy: +37.73%, qoq: -4.88%), net profit of 0.068 billion yuan (yoy: +262.73%, qoq: -25.54%), net profit of 0.055 billion yuan after deducting non-return to mother (yoy: +152.81%, qoq: -29.76%). The sales volume of the company's NOR Flash and automotive EEPROM products in the third quarter of this year exceeded and approached shipments for the first half of the year, respectively, but we expect 3Q24's overall revenue to decline slightly month-on-month due to a decline in mobile phone/panel EEPROM and SPD revenue compared to the second quarter. Furthermore, due to the increase in the share of automotive products, 3Q24 gross margin increased month-on-month, but due to exchange losses and increased R&D investment, 3Q24 net profit margin fell 7.46pct month-on-month to 26.89%. In the long run, we believe SPD and automotive EEPROM will still be the main incremental revenue contributors, and NOR Flash will outline a new growth curve and maintain a “buy” rating.

3Q24 review: NOR and automotive EEPROM showed outstanding performance. The gross margin was further increased month-on-month. The company's automotive-grade EEPROM was successfully expanded to global customers. NOR Flash achieved large-scale supply in the fields of e-cigarettes, TWS Bluetooth headsets, AMOLED mobile phone screens, and PLC components. The revenue performance of these two major product lines was outstanding month-on-month. Furthermore, the voice coil motor driver chip product line has been successfully iterated, and shipments have maintained steady growth. However, due to the pace of downstream customer pick-up and exchange rate fluctuations, we expect mobile phone/panel EEPROM and SPD revenue to decline month-on-month. In terms of gross margin, due to the increase in sales share of products used in high-value-added markets such as automobiles, 3Q24 gross margin increased 11.21/0.40 pct to 55.17%, respectively. Considering the impact of factors such as the entry of new employees in 3Q24, the company's R&D expenses increased slightly by 4.72 million yuan month-on-month, and the R&D expenditure rate increased to 18.82%. As of the end of the third quarter, the company's inventory was 0.227 billion yuan, a slight increase from the end of the previous quarter (0.22 billion yuan), and the number of inventory turnover days remained stable (176 days).

4Q24 outlook: Automotive products are entering a period of rapid expansion, and NOR Flash's share is expected to continue to increase in traditional business, and the company's new products will usher in breakthroughs one after another. Specifically: 1) The company maintains a leading position in the global EEPROM market. As the penetration rate of DDR5 memory modules continues to increase in 24-25, SPD shipments are still expected to maintain year-on-year growth. Furthermore, the company's automotive product layout has entered a harvest period, product specifications and customer coverage have been continuously improved, and automotive-grade EEPROM shipments have increased rapidly; 2) the company's NOR Flash product layout has been expanded from small capacity to medium to large capacity, and with NORD's characteristic process advantages, it is expected that the market share and brand influence will continue to expand; 3) the company's OIS voice coil motor driver chips have been tested and verified by smartphone manufacturers, and some specification products are expected to be used in high-end and flagship models of mainstream smartphone manufacturers.

Investment suggestion: The target price is $83.7, maintaining the “buy” rating and considering the slow pace of SPD and mobile EEPROM performance release. We lowered the company's net profit to mother in 24/25/26 to 0.279/0.47/0.649 billion yuan respectively (previous value: 0.365/0.529/0.729 billion yuan). Considering the new product release performance, it will still take some time, and give 28x 25PE (comparable company Wind's consistent median expectation of 37x 25PE), target price 83.7 Yuan (previous value: 75.9 yuan), maintaining a “buy” rating.

Risk warning: DDR5 penetration falls short of expectations, market competition intensifies, and new product promotion falls short of expectations.