Investment highlights:

The development of all major business segments was steadily promoted, and business performance was steady in the first three quarters. In the first three quarters of 2024, the company achieved operating income of 18.908 billion yuan, +25.38% year-on-year, realized net profit of 2.375 billion yuan, +544.74% year-on-year, and realized net profit after deduction of 2.293 billion yuan, or +1665.81% year-on-year. In Q3 2024, the company achieved operating income of 6.817 billion yuan, a year-on-year net profit of 1.008 billion yuan, a year-on-year net profit of +368.33%, and a net profit of 0.921 billion yuan after deduction of non-return to mother, +341.01% year-on-year.

The smartphone & smart driving market continues to recover, and product structure optimization enhances profitability.

Market demand continued to recover in 2024, and downstream customer demand increased. Along with the company's product introduction in the high-end smartphone market and the continued penetration of autonomous driving applications in the automobile market, the company's revenue and gross margin achieved significant year-on-year growth in the first three quarters of 2024. Furthermore, in order to better cope with the impact of industry fluctuations, the company actively promoted product structure optimization and supply chain structure optimization, and product gross margin gradually recovered, and overall performance improved markedly. In the first three quarters of 2024, the company achieved a gross sales margin of 29.61%, +8.33pct year on year, and a net sales margin of 12.51%, and +10.12pct year on year. Profitability and operating efficiency have improved markedly.

High-end main camera products were successfully introduced, mobile CIS & automotive CIS two-wheel drive. The company is a leading CIS player in the industry and continues to make efforts in the CIS field of high-end mobile phones. The 1.2 um 50 million pixel high-end image sensor OV50H launched by 2024H1 is widely used in mainstream high-end smartphone rear camera sensor solutions in China, and is gradually replacing similar products from overseas competitors; the company's 50 million pixel series products with different pixel sizes have increased significantly in the smartphone main camera application field, continuously increasing the value and profitability of the company's products. The company's automotive CIS business continues to benefit from the advancement of automobile intelligence and electrification, and its market share continues to increase. According to data from the Passenger Transport Federation, from January to July 2024, world automobile sales reached 51.14 million units and new energy vehicles reached 8.86 million units; from January to July 2024, the share of new energy vehicles reached 17.3%, of which pure electric vehicles accounted for 11.2%.

Profit forecasts and investment ratings are combined with industry developments. The company's 2024-2026 revenue is estimated to be 26.546, 31.291, 36.967 billion yuan, respectively, and net profit to mother is 2.982, 4.319, and 5.51 billion yuan respectively, EPS is 2.46, 3.56, and 4.54 yuan respectively, and the corresponding PE is 44X/30X/24X respectively. Weir Co., Ltd. is the world's leading semiconductor design company. R&D centers and business networks are spread all over the world, and the company continues to be optimistic that the company is at the high-end The smartphone market continues to be introduced and the penetration rate of autonomous driving applications in the automobile market is increasing.

First coverage, giving a “buy” rating.

Risks suggest that consumer electronics demand falls short of expectations, major customer business new products fall short of expectations, new product launches fall short of expectations, market demand recovery falls short of expectations, and increased industry competition.