Revenue for the first three quarters increased 4% year-on-year, and revenue for the third quarter increased 11% month-on-month. Benefiting from the growth in demand in market segments such as automobiles, new energy, servers, optical modules, etc., and the gradual release of new signal chain and power management chip products, the company achieved revenue of 0.848 billion yuan (YoY +4.31%) in the first three quarters of 2024, of which signal chain chip revenue was 0.71 billion yuan (YoY +9.37%) and power management chip revenue 0.138 billion yuan (YoY -13.91%); achieved net profit to mother - -0.099 billion yuan (YoY - 706%), net profit not attributable to mother - -0.169 billion yuan (YoY -243%). 3Q24 achieved revenue of 0.342 billion yuan (YoY +69.8%, QoQ +11.4%), of which signal chain chip revenue was 0.291 billion yuan (YoY +73.25%), power management chip revenue 0.05 billion yuan (YoY +51.10%); realized net profit attributable to mother - -0.033 billion yuan, net profit not attributable to mother - -0.056 billion yuan.

Gross margin increased month-on-month in the third quarter, while rates declined month-on-month during the period. The company's gross margin for the first three quarters of 2024 was 49.46%, down 4.1pct from the same period last year. Of these, 3Q24 gross margin was 51.60%, up 1.6 pct year on year, and 3.3 pct month-on-month. In terms of expenses during the period, R&D expenses increased 4.3% year on year to 0.394 billion yuan in the first three quarters, and the R&D rate remained flat at 46.43%; the management fee rate increased 0.2 pct to 9.48% year on year, the sales rate increased 2.8 pct to 9.75% year on year, and the financial rate increased 1.0 pct to -1.12% year on year. Among them, the 3Q24 R&D rate and management rate all fell month-on-month, the sales rate increased year-on-month, and the financial rate increased month-on-month. The total rate for the four periods decreased by 6.7 pct year on year, and decreased by 4.0 pct from month to month.

Chuangxinwei, the target of the acquisition, completed the transfer and became a wholly-owned subsidiary of the company. The company has completed the asset transfer of 100% of Chuangxin Micro's shares. Chuangxinwei has become a wholly-owned subsidiary of the company. After that, the company will steadily promote business cooperation with Chuangxinwei to continue to cultivate applications in core markets such as communications, industry, new energy, automotive electronics and consumer electronics to enhance product performance and technical service capabilities. Epitaxial mergers and acquisitions are the only way to develop analog chip companies. On the premise of ensuring steady endogenous growth, the company will actively promote appropriate industrial mergers and acquisitions, focusing on 1) business synergy, 2) complementarity of market and customer resources, and 3) product development and closed-loop capabilities.

Investment advice: The acquisition was successfully completed, and the “superior to the market” rating was maintained. Due to ongoing price competition pressure and high R&D expenditure, we lowered the company's net profit to mother in 2024-2026 to 0.107/0.215/0.385 billion yuan (previous value was 0.15/0.284/0.403 billion yuan), and the PE corresponding to the stock price on October 29, 2024 was 147/73/41x, respectively. The company continues to enrich its products and application fields, and automotive-grade products are progressing smoothly. At the same time, the acquisition was successfully completed, maintaining the “superior to the market” rating.

Risk warning: New product development falls short of expectations; demand falls short of expectations; risk of increased competition.