Incident: The company released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved operating income of 3.274 billion yuan, up 0.91% year on year; realized net profit of 0.254 billion yuan, up 10.61% year on year; net profit after deduction was 0.197 billion yuan, down 2.21% year on year.

Performance is in line with expectations, and profitability has improved

(1) Operating conditions: On a quarterly basis, in Q3 of 2024, the company achieved operating income of 1.441 billion yuan, a year-on-year decrease of 10.76%; in Q3, net profit to mother was 0.158 billion yuan, an increase of 13.55% over the previous year. The company's 3C business grew steadily in 2024, and looking forward to 2025. As the degree of fruit chain innovation increases, the company is expected to achieve rapid growth as a core equipment provider in the industry.

(2) Profitability: In the first three quarters of 2024, the company's gross sales margin and net sales margin were 34.78% and 7, respectively.

60%, +1.64pct and +0.73pct year over year, respectively, improving profitability. As the operating conditions of the new energy business improve, the company's profitability has increased.

(3) Period expenses: In the first three quarters of 2024, the company's sales, management, finance, and R&D expenses rates were 7.47%, 5.29%, 1.64%, and 11.70%, respectively, +0.04pct, +0.22pct, +1.55pct, and +0.11pct, respectively. The overall cost rate for the company was relatively stable during the period.

AI terminals have boosted the prosperity of the fruit chain, and core equipment vendors have fully benefited.

(1) The fruit chain is expected to usher in a boom cycle, and the company will fully benefit. The development of AI terminals is expected to bring about a new round of switching demand. At the same time, consumer electronics products are expected to innovate in computing power, heat dissipation, optics, etc., and bring a new round of 3C automation requirements, and fruit chains are expected to usher in a new boom cycle. The company is the core equipment supplier of fruit chain and is expected to benefit from the rise in fruit chain prosperity.

(2) Flexible line+MR equipment, contributing new growth points. ① Flexible wire: Flexible wire has the effect of increasing the automation rate. Driven by major customer demand to reduce personnel, the demand for flexible lines is expected to continue to grow in the next few years. Currently, the company's flexible modular production line is mainly used in the assembly and packaging of mobile phone frames. It is expected to cover more process steps in mobile phone production in the future. At the same time, the company plans to gradually expand the application of flexible lines to other consumer electronics terminal products. ② MR equipment: MR has broad application prospects in various fields such as gaming and entertainment, education, and healthcare. The development of MR will drive the growth in demand for equipment. The company is a core equipment provider in the FATP segment and benefits from MR development trends.

The company's multi-dimensional layout creates a new growth curve.

(1) There is plenty of room for domestic replacement of semiconductor equipment, and the company continues to invest to create new growth points. The semiconductor sector is the key direction of the company's strategic expansion. The company focuses on market segments such as advanced packaging, optoelectronics, and AI computing power, and carries out product development projects and iterative optimization for advanced packaging process equipment requirements and AOI inspection requirements, and continuously improves the accuracy, reliability, and ease of use of products. With the company's continued investment, the semiconductor business is expected to create a new growth point.

(2) Develop a low-altitude economy and benefit from location advantages. Policies related to the low-altitude economy continue to be introduced. Driven by top-level design, the low-altitude economy is expected to flourish. According to the 2024 mid-year report, the company cooperated with the local government to plan to build an integrated unmanned sensing system for open space to create “one platform, one network” for drone services in urban management, emergency rescue, inspection, etc. The company provides automatic drone airports and dispatch and command platforms within the system, which mainly plays a role in providing power exchange services for drones.

Profit forecast: The company is a leading domestic 3C automation equipment company, and is expected to benefit from a year of fruit chain innovation in 2025. According to the three-quarter report, we revised our profit forecast. The company's revenue for 2024-2026 is 5.171, 6.125, and 7.529 billion yuan (the original value was 5.171, 6.455, 7.942 billion yuan), and the company's net profit to mother for 2024-2026 is 0.461, 0.617, and 0.753 billion yuan, respectively (the original value was 0.496, 0.661, 0.776 billion yuan), and the corresponding PE is 23, respectively.

5, 17.5, 14.4 times, maintaining the “gain” rating.

Risk warning: risk of industry prosperity falling short of expectations; risk of new business development falling short of expectations; risk of increased market competition, etc.