9M24 achieved revenue of 3.767 billion yuan (yoy -6.66%), net profit of 0.185 billion yuan (yoy -48.43%), deducting non-net profit of 82.6822 million yuan (yoy -70.62%). Looking at a single quarter, the company's Q3 revenue was 1.175 billion yuan (yoy +1.46%), and net profit of -0.011 billion yuan (yoy -123.10%), lower than our forecast (0.028) billion yuan). The year-on-year decline in the company's profit is mainly due to the year-on-year pressure on the wireless communication business and the increase in R&D expenses. Looking forward to the future, we are optimistic that the company will achieve performance growth under two major development momentum: 1) new businesses such as Beidou, unmanned, satellite, and low altitude will be implemented in sequence; 2) in 25-26, wireless communication terminals are expected to fully recover and achieve high growth. Maintain a “buy” rating.

Gross profit margin declined in the short term due to the impact of product structure. In the first three quarters of 2024, the company achieved a gross profit margin of 29.97%, a year-on-year decline of 3.78 pcts, a net profit margin of 4.91%, and a year-on-year decline of 3.98 pcts. As the high-margin Beidou business grows in the future and wireless communication revenue recovers, the company's gross margin is expected to increase. In terms of cost rates, in the first three quarters of 2024, the company's sales expense rate/ management expense rate/ financial expense ratio were 3.25%/6.26%/-0.59%/18.64%, respectively, -0.27/+0.28/+0.02/+2.51 pct, respectively. The company strengthened R&D investment in emerging fields such as Beidou, satellite Internet, unmanned space, and low altitude in an industry environment where military products are sluggish, which is expected to build a competitive advantage.

China Mobile continued to increase its holdings and deploy management personnel. By the end of the third quarter, China Mobile held 49.0094 million shares of the company, increasing its shareholding ratio from 1.40% at the end of the second quarter to 1.97%. According to the company's three-quarter report, China Mobile Capital recently negotiated and recommended a China Mobile manager as a candidate for the director of Haige Communications to Guangzhou Mathematical Group, the controlling shareholder of the company. Guangzhou Mathematical Group accepted it in principle. After China Mobile Capital determines the candidate, Guangzhou Mathematical Group and the Company will carry out the review procedure in accordance with relevant regulations. On October 11-13, 2024, the company appeared as a strategic partner at the 2024 China Mobile Global Partner Conference and closely cooperated with China Mobile in the field of Beidou high-precision services and terminal applications. In the future, it will expand business collaboration in five areas: Beidou+ industry applications, space-space integration, low-altitude industrial infrastructure construction, integrated vehicle road cloud construction, and integrated operation and maintenance.

Maintain a “buy” rating

Affected by short-term fluctuations in industry customer demand, the company's wireless communication business is under pressure in the short term. We lowered our forecast. Looking ahead to 25-26, the net profit to the mother is 0.595 billion yuan (previous value: 8.12); looking ahead to 25-26, with the growth of new business and the recovery of wireless terminals, the company's profit is expected to recover. The net profit for 25-26 is expected to be 0.9/1.184 billion yuan (previous value: 10.29/13.32). Considering the company's leading position and synergy in multiple fields, we will give a 25-year PE38x (comparable company) Wind average: 29x), target price 13.78 yuan/share, maintaining a “buy” rating.

Risk warning: military orders fall short of expectations, business development falls short of expectations; risk of impairment of goodwill.