Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, it achieved operating income of 41.135 billion yuan, -0.42% year over year; realized net profit of 0.941 billion yuan, +20.90% year over year, and realized net profit of 0.941 billion yuan without return to mother, +40.25% year over year. Among them, 2024Q3 achieved revenue of 14.056 billion yuan, -1.68%/+1.85%, year-on-month; realized net profit of 0.305 billion yuan, +0.50%/-7.73% year-on-month, respectively; realized net profit of 0.303 billion yuan without return to mother, +10.09%/-7.46%, respectively.

Profitability has improved, and the results of reducing costs and increasing efficiency have been remarkable. In the first three quarters of 2024, the company continued to reduce costs and increase efficiency. The “Profit Improvement” plan achieved remarkable results, and the profitability of the main business continued to increase. By business, the company's auto safety business revenue in the first three quarters was 28.4 billion yuan, with a gross profit margin of 14.0%, +2.6pp. With the continuous improvement of business in Europe and America, the automotive safety business has achieved profits in all four major business regions around the world, and performance has improved sequentially for many consecutive quarters. In the first three quarters, automotive electronics achieved revenue of 12.7 billion yuan and a gross profit margin of 19.2%, which remained relatively stable. The gross profit margin for the first three quarters of 2024 was 15.59%, +1.65pp; Q3 gross profit margin was 15.74%, +0.81pp/+0.24pp, respectively. The company's net profit margin for the first three quarters was 3.07%, +0.96pp; Q3 net profit margin was 3.03%, +0.42pp/ -0.28pp, respectively. The company strengthened its ability to control expenses. Expense ratios decreased year-on-year during Q3 of 2024. Sales/management/finance/R&D expenses were 0.93%/4.31%/1.51%/4.57%, respectively, +0.03pp/-0.93pp/-0.09pp/+0.23pp.

New business orders are growing rapidly, and the share of new domestic orders has increased. In the first three quarters of 2024, the total amount of new orders received by the company worldwide was about 70.4 billion yuan, +19.3% year-on-year. Of these, orders related to new energy models were about 37.6 billion yuan, +7.4% year-on-year, and new energy orders accounted for 53.4% of all new orders. By business, the total amount of new orders for the automotive safety business was about 49.1 billion yuan, +44.4% year-on-year, while the total amount of new orders for the automotive electronics business was about 21.4 billion yuan, -14.4% year-on-year. By market area, the company continues to deepen its cooperation with independent brands and new forces in the Chinese market. The amount of new domestic orders is about 31 billion yuan, +24% over the same period, and the domestic order amount accounts for about 44%, +2pp compared to the same period last year.

Deeply involved in the field of intelligence, business categories continue to expand. The company actively grasps the opportunities for the rapid development of smart electric vehicles, and continues to expand its business categories in the field of smart electric vehicles. In the first three quarters, the company acquired new UWB technology services (digital keys, cockpit live detection, etc.), ADAS L2 Smart Camera (front-view all-in-one) business, and vehicle-road cloud integration business in the first three quarters. As the company continues to increase investment in R&D and actively expand its business categories, it is expected that its competitiveness in emerging business fields will continue to improve.

Profit forecasting and investment advice. The company's net profit for 2024-2026 is expected to be 1.345/1.83/2.256 billion yuan, CAGR is 27.7%, and EPS is 0.95/1.30/1.60 yuan respectively. The corresponding PE is 18/13/11 times, respectively, maintaining a “buy” rating.

Risk warning: Emerging sectors and industries are developing more slowly than expected, rising raw material costs, and exchange rate fluctuations.