Incident Overview

The company released its 2024 three-quarter report.

The decline in Q3 revenue has narrowed markedly, and I am optimistic that an inflection point in Q4 revenue will occur

24Q1-Q3 achieved revenue of 0.733 billion yuan, or -13% year over year, of which Q3 was 0.211 billion yuan, or -7% year over year. The decline narrowed markedly, which was basically in line with our expectations. By industry: 1) 3C: The industry is recovering slowly. We judge that the 24Q3 3C industry's revenue is still under slight pressure; 2) New energy: the lithium battery industry capital is slowing down, and we judge that 24Q3's new energy industry revenue is still under some pressure; 3) Automobiles & Semiconductors: The rapid introduction of the company, we judge that it has achieved significant growth, which can offset the pressure on the 3C and new energy industries. Looking back, considering the gradual decline in the share of new energy revenue, the 3C business is expected to usher in a clear recovery in '25. Combined with rapid growth in the semiconductor & automotive industries, an inflection point in the company's revenue is imminent.

Q3 The sales expense ratio increased markedly, and an inflection point after deducting non-profit appeared

24Q1-Q3's net profit to mother and net profit after deducting non-profit were 1.32 million yuan and 121 million yuan, respectively, -36% and -33%. Of these, Q3 was 1,858 and 24.27 million yuan, respectively, -40% and +2% year-on-year, which basically met our expectations, and there was an inflection point after deducting non-profit. The net sales margin for 24Q3 was 8.81%, year-on-year - 5pct, and the profit level declined. 1) Margin side: 24Q3 gross sales margin was 59.84%, year-on-month -6pct. We determined that it was mainly due to a decrease in gross margin of the new energy business; 2) Expense side: The cost ratio during the 24Q3 period was 57.34%, +2.17pct year-on-year, of which the sales expense ratio was +5.39pct year over year.

Machine vision is a track of heavy snow in Changpo, optimistic about the company's long-term growth logic

According to GGII data, China's machine vision market size in 2022 was 17.065 billion yuan, of which the machine vision market size for the 3C and lithium battery industries was 4.3 billion yuan and 2.1 billion yuan respectively. The company's revenue and profit volume is small, and there is more room for growth. The company has a complete hardware and software product line, and continues to accelerate the implementation of deep learning (industrial AI) technology in various industries. In 2023, the company cooperated closely with consumer electronics customers. By applying the company's deep learning (industrial AI) technology, it is possible to solve testing pain points that have been difficult to solve in the industry for a long time, and gradually enter the technical verification and testing stage. Furthermore, on the basis of consolidating competitiveness in the 3C and new energy industries, the company continues to expand downstream application fields and further open up room for growth.

Investment advice

Considering the boom in the 3C and new energy industries, we adjusted our 2024-2026 revenue forecasts to be $951, 12.65, and 1,593 million yuan (original values of 11.60, 13.85, and 1,632 million yuan), +1%, +33%, and +26%, respectively, and adjusted 2024-2026 net profit forecasts of 1.48, 2.58, and 387 million yuan (original values of 3.00, 3.99, and 507 million yuan), respectively, -24%, +75%, and +49% year-on-year EPS in 2026 was 1.21, 2.11, and 3.17 yuan (original values 2.45, 3.26, and 4.15 yuan), and the 2024/10/29 stock price of 60.63 yuan corresponds to PE 50, 29, and 19 times, respectively, maintaining the “gain” rating.

Risk warning

3C, the new energy industry is declining, new business expansion falls short of expectations, etc.