Incident: The company released its three-quarter report for 2024. In the third quarter of 2024, the company achieved revenue of 2.648 billion yuan, a year-on-year increase of 37.25%. In the third quarter of 2024, the company achieved net profit of 0.178 billion yuan, an increase of 53.54% over the previous year. The company's gross sales margin reached 21.06% in the third quarter of 2024, down 0.82 pcts from the previous year. We believe that the main reason for the decline in gross margin was the increase in the share of new products, and the new products did not yet show a strong scale effect. The company's net sales margin reached 6.77% in the third quarter of 2024, up 0.7 pcts year on year and 0.14 pcts month on month. We believe that as mass production of the company's new projects accelerates, the company's profitability is expected to continue to increase in the future.

3Q24's automotive electronics business and precision die-casting business grew rapidly, and order development results were remarkable. At the customer level, the company's automotive electronics business has made remarkable progress in order development, and the order amount has increased dramatically; the customer base continues to expand, joint ventures and international car company customer projects have increased, and new customer projects have been obtained from Stellantis Group, Changan Mazda, and Changan Ford. At the product level, sales revenue for products such as cockpit domain control, HUD, screen display, in-vehicle wireless charging, precision motion mechanisms, and digital acoustics in the company's automotive electronics business increased sharply year-on-year; at the same time, sales revenue for automotive intelligence-related parts and optical communication module-related components in the precision die-casting business increased sharply year-on-year.

The popularity of Deep Blue 05 is expected to ensure that the company's cockpit domain control & AR-HUD shipments continue to grow. In October, the Deep Blue S05, equipped with a variety of new Huayang products, was officially launched. Among them, the Deep Blue S05 cockpit domain controller product was developed based on the Huayang Domain Control 2.0 platform and is equipped with a Qualcomm Snapdragon 8155 high-performance chip, which can simultaneously drive the operation of the 2.5K central control screen, AR-HUD, and lighting headlights; Huayang is equipped with an augmented reality AR-HUD for the Deep Blue S05, which supports the free combination of 7 custom functions such as lyrics and AI navigation to achieve personalized management of driving information.

Profit forecast: We expect the company's revenue for 2024-2026 to be 9.239, 11.444, and 14.76 billion yuan, and net profit to mother of 0.65, 0.87, and 1.12 billion yuan respectively. The current stock prices correspond to 24.1x, 17.9x, and 14.0x PE, respectively, maintaining a “buy” rating.

Risk warning: Market competition intensifies; customer model sales fall short of expectations; new business development falls short of expectations.