3Q24's performance was in line with expectations: the company's revenue for the first three quarters was +17.5% YoY to 4.97 billion yuan (67% of our original full-year forecast), and net profit to mother +24.1% YoY to 0.742 billion yuan (68% of our original full-year forecast); of these, 3Q24 revenue +8.4% YoY/7.3% month-on-month to 1.72 billion yuan, net profit to mother +44.7% YoY, +34.0% to 0.292 billion yuan. We judge that the month-on-month increase in 3Q24's performance was mainly due to a fall in upstream raw material prices+internal cost reduction.

3Q24 gross margin was restored, and 4Q24E is expected to decline: in the first three quarters, the company's gross margin was +0.09pcts yoy to 29.05%; 3Q24 gross margin was +0.98pcts yoy to 12.45%; 3Q24 gross margin was +0.96pcts/month-on-month +2.09pcts to 29.75%, and marketing management and research expenses ratio +2.35pcts/month-on-month +1.05pcts to 13.43% yoy. We believe that 3Q24's outstanding gross margin performance is mainly due to the stabilization of aluminum prices and the company's continued implementation of cost reduction and efficiency; it is expected that 4Q24E will be affected by high fluctuations in aluminum prices, and the company's gross margin may decline.

The long-term incentive mechanism has been improved, lean management+global production capacity layout guarantees long-term profits: The sixth phase of the company's restricted stock incentive plan (draft) was announced. The plan plans to grant 857 restricted shares totaling 8.032 million shares, referring to the achievement of the incentive goals of the company's previous five incentive plans (except for 2020, which did not achieve 100% of the incentive targets due to the pandemic, the performance for the rest of the years met the assessment requirements). It is estimated that 2025E/2026E's revenue will reach more than 7 billion yuan. We believe that the company's advantages are mainly: 1) Product category improvement: the company's “invisible champion” product position is stable, and has basically achieved full coverage of aluminum alloy high-pressure die-casting products for new energy vehicles; it is optimistic about the coordinated development of the company's “small, medium and large” product structure, and is expected to gradually increase in volume and price with larger products or open a “second growth curve”. 2) Continuous lean management: The company continues to implement the “lean digital factory” strategy. It is expected that after absorbing and merging the wholly-owned subsidiary Xinfei, it is expected to further optimize the organizational structure, improve operational efficiency, and reduce costs. 3) Globalization of production capacity layout: the first phase plant at the domestic production base in Maanshan, Anhui, has been put into mass production in 2023 (main production power/integrated die-cast structural parts for energy storage battery trays), and the second phase is progressing in an orderly manner; overseas layout of production bases in North America/Southeast Asia/Europe; a) Mexico Phase II (production of structural parts and components for new energy vehicles) will be put into operation in 2Q25E, b) mass production line for aluminum alloy materials in Malaysia is expected to begin on 2024/7. Mass production, c) 2024/4 The company set up a subsidiary in Hungary to respond to European customer support needs. We believe that the company's global production capacity layout may achieve vertical integration of upstream raw materials+deepening cooperation with downstream customers and diversifying some geopolitical risks, which is expected to guarantee long-term profits in collaboration with lean management.

Maintaining a “buy” rating: We are optimistic that the company's lean management+global layout will enable long-term development prospects, maintain the 2024E/2025E/2026E net profit forecast of 1.085 billion yuan/1.278 billion yuan/1.57 billion yuan, maintain a “buy” rating, and maintain a target price of 16.64 yuan.

Risk warning: International trade frictions and policy risks; production capacity of the company's overseas factories falling short of expectations; annual decline risks; exchange rate fluctuations; fluctuations in upstream raw material prices; Mexico's imposition of aluminum import tariffs on aluminum increases operating costs; downstream automobile demand falls short of expectations.