Investment highlights: On October 30, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 4.804 billion yuan, +8.96% year-on-year; realized net profit of 0.623 billion yuan, or +15.56% year-on-year. 2024Q3 achieved operating income of 1.519 billion yuan, -0.71/ -10.45% month-on-month; realized net profit of 0.203 billion yuan, or +1.25/ -9.83% month-on-month.

Driven by a decline in overseas downstream vehicle sales, the company's revenue declined in the third quarter. The company accounts for a high share of overseas revenue, accounting for 84.5% in 2023. The main customers are global car companies such as Stellanis, GM, and Ford. 2024Q3 sales in the US automobile market declined due to factors such as rising new car prices and the tightening of the loan environment. According to Marklines, the 2024Q3 achieved 3.96 million vehicle sales in the US, -3.81% year over year and -6.45% month on month, causing the company's revenue to drop by 0.7/10.5% year on month.

Gross profit margin has been rising steadily, and the ability to control costs continues to improve. Driven by new businesses such as roof assembly, the company's gross margin performance was good. The gross profit margin for the first three quarters of 2024 was 28.3%, +0.3 pct year on year, and the sales/management/R&D/finance expense ratios were +1.8/+3.4/ +0.3%, respectively, and -0.6/-0.1/-0.5/+1.3 pct year on year. Under the increase in efficiency, R&D and sales expenses were significantly reduced. Among them, the management expense ratio declined only slightly due to the expansion of overseas personnel, driving net interest rates of 12.97% in the first three quarters to +0.74pct; Affected by earnings, the financial expense ratio was negative, but this year it rebounded due to exchange gains and losses. 2024Q3 achieved a gross profit margin of 28.83%, and the year-on-month ratio was +0.66/0.71 pct, driven by new businesses such as roof assembly; sales/management/R&D/finance expense ratios were +1.8/+3.9/ +1.2% respectively, -0.8/-1.2/+2.3 pct year on year, -0.1/-2.2/+0.8/+2.5pct month-on-month, and management expenses decreased significantly month-on-month. Mainly, the investment base for overseas new production capacity was high, and financial expenses increased significantly from month to month, mainly due to continuous optimization of foreign exchange. Net profit margin was +0.3/ +0.1% YoY in the next 24Q3.

Expand the assembly horizontally from a single component to open up a secondary growth curve. While maintaining the impressive production and sales ratio of its main products, the company is actively expanding product categories to achieve a significant increase in the value of bicycles. The total bicycle value of the company's main products in 2023 is about 589 yuan, and the bicycle value of the newly expanded roof and roof assembly products is expected to reach 700/4000 yuan respectively, which is a significant increase over traditional products, opening up a second growth curve for the company.

The profitability of the Mexican plant has recovered, and new production capacity is gradually being put into operation, which is expected to be an important support for profit growth. 2024H Daimei Mexico Interior achieved revenue of 1.84 billion yuan, +7.3% year over year; net profit of 40.33 million yuan, +99.6% year over year; net profit of 2.19%, +1.01 pct year on year. With the gradual increase in profitability of the Mexican factory, combined with the gradual production capacity of 0.3 million integrated ceiling systems and 0.6 million sets of ceiling products, Mexico will become an important support for the company's future profit growth.

Profit forecast and valuation: Considering the impact of the decline in sales in North America, which caused a certain drag on the company's revenue and net profit, we lowered our 2024-2026 revenue forecast from 7.1/8.37/9.86 billion yuan to 6.61/8.12/9.6 billion yuan, and also lowered the net profit forecast to mother from 0.9/1/1.18 billion yuan to 0.86/0.97/1.14 billion yuan. Considering the expansion of the company's products from individual products to integrated products, while actively growing its global layout, revenue and net profit, the company has maintained a high dividend rate in recent years. The dividend rate for 2021-2023 was 87/83/ 78%, respectively. Shareholder returns are excellent, and it maintains a “buy” rating as a growth and dividend.

Risk warning: Increased tariff rates in overseas markets, effects of exchange rate fluctuations, fluctuations in raw material prices.