An overview of the incident. The company disclosed its report for the third quarter of 2024. Revenue for the first three quarters of 2024 was 4.97 billion yuan, +17.5% YoY, net profit to mother 0.74 billion yuan, +24.1% YoY; 2024Q3 revenue was 1.72 billion yuan, +8.4% YoY, +7.3% month-on-month, and net profit to mother 0.29 billion yuan, +34.0% YoY.

In addition, the company announced the sixth restricted stock incentive plan (draft), which plans to grant 8.032 million shares of restricted shares, accounting for 0.8% of the company's total share capital. The initial grant target is 857 people, at a grant price of 7.15 yuan/share.

2024Q3's performance exceeded expectations, and profitability picked up sharply. 1) Revenue side: The company achieved operating income of 1.72 billion yuan in 2024Q3, +8.4% year over month, and we think the main reason for the year-on-month increase was: the company's traditional small parts business released on-hand orders one after another + sales growth for medium and large core customers (Ideal Auto 2024Q3 sold 0.153 million vehicles, +45.4% year over month, +40.8% month on month); 2) Profit side: The company's gross margin in 2024Q3 was 29.7%, +1.0pcts year-on-month, +2.1pct, net The interest rate was 17.3%, +4.6pcts year on year, +3.2pcts month-on-month, and net profit to mother was 0.29 billion yuan, +44.7% year-on-year, and +34.0% month-on-month. The company's 2024Q3 performance exceeded expectations, mainly due to: ① the company's profit level picked up due to order release+scale effect; ② net profit rebounded sharply due to positive exchange revenue+drop in shipping costs. 3) Cost side:

The company's 2024Q3 sales/management/R&D/finance expense ratio was 1.2%/6.8%/5.5%/-1.8%, 0.0/+1.2/-3.0pcts year-on-year, +0.1/-0.2/-2.4pcts.

An equity incentive plan was released to guarantee the company's long-term development. The company issued the sixth restricted stock incentive plan (draft): it is proposed to grant 8.032 million shares of restricted shares, accounting for 0.8% of the company's total share capital; the grant price is 7.15 yuan/share, which is a 50% discount compared to the current price; 857 people will be awarded for the first time. It is estimated that the 2024-2026 equity incentive cost amortization amount will be $3.37/38.192/12.356 million, respectively. The highest target for company-level 2025-2026 performance is: based on 2023, the actual revenue growth rate for 2025/2026 is not less than 19.2%/25.9% (actual revenue is not less than 7.1/7.5 billion yuan). We believe that the company's move will help attract outstanding talents, fully motivate core personnel, and ensure the long-term development of the company.

The new energy business accelerates lean management from beginning to end. The company continues to accelerate its market layout in the field of new energy vehicles and smart cars, and step up product development efforts for new energy vehicle three-electric systems, body structural parts, and intelligent driving systems. In addition, the company has firmly established the product positioning of “new energy vehicles+intelligent driving”, continuously improving the product structure. Products such as three-electric, steering, and intelligent driving supporting leading NEV car companies are growing strongly, and the value of bicycles continues to rise. In terms of management, the company continuously improves internal management efficiency, continuously and effectively promotes cost reduction measures, and has benefited from lean management and overall efficiency improvements in the continuous release of the company's production capacity, and the quality of operations has improved.

Investment advice: We are optimistic that the company's market share in the traditional product field will continue to increase, and that the development of the electric intelligent supporting business will drive revenue of 7.31/8.96/10.86 billion yuan in 2024-2026, net profit of 1.09/1.31/1.58 billion yuan, and EPS of 1.12/1.34/1.61 yuan. Corresponding to the closing price of 14.07 yuan/share on October 29, 2024, PE was 13/10/9 times, respectively, maintaining the “recommended” rating.

Risk warning: Passenger car sales fall short of expectations; company customer growth falls short of expectations; exchange rate fluctuations, etc.