The company announced third quarter results: the company's revenue for the first three quarters of 2024 was 2.2 billion/yoy -13.88%; net profit due to mother 0.095 billion/yoy -62.46%; net profit after deducting 0.076 billion/yoy -66.26%; of these, 24Q3 revenue 0.744 billion/yoy -12.9%, and net profit to mother was 0.044 billion/yoy -18.6%. 24M1-9 is affected by the stagnation of production expansion in the power battery industry, and revenue/profit is under pressure; in the future, the company will enter the 3C industry and keep up with major customers breaking through small steel case battery welding technology, which is expected to continue to benefit and maintain a “buy” rating.

Gross margin rebounded marginally in 24Q3, and the 24M1-9 sales/management/R&D expense ratio all increased. In the first three quarters of 24, the company achieved a gross profit margin of 31.60%, a year-on-year decrease of 2.22pct; the net profit margin was 4.13%, a year-on-year decrease of 5.76 pcts. In the 24Q3 quarter, the company achieved a gross profit margin of 33.55%, up 3.37pct year on year; achieved a net profit margin of 5.61%, a year-on-year decrease of 0.66 pct, and profitability declined relatively.

In terms of cost ratios, the company's sales expense ratio/management expense ratio/R&D expense ratio for the first three quarters of 2024 were 4.80%/15.54%/7.66%, respectively, up 0.92 pct/0.78 pct/1.65 pct year-on-year, respectively. The main reason was that expenses were relatively fixed after the decline in operating income.

The share of the non-lithium battery business is expected to continue to increase, and the 3C industry layout is expected to add 24M1-9. Companies are affected by the stagnation of production expansion in the power battery industry, and revenue/profit is under pressure. The company vigorously explores customers in the non-lithium battery industry and increases the share of non-lithium battery orders. The company's orders in the consumer electronics sector are growing rapidly, and it continues to receive orders for new products from top international customers, providing a guarantee for the company's subsequent improvement in profitability. In the 3C industry, on the one hand, the company focuses on the layout of button battery assembly lines. On the other hand, it benefits from the European trend of prohibiting the use of glue to bond batteries in electronic products and the increase in demand for small steel case batteries from large overseas customers. The welding technology for small steel case batteries laid out in advance is expected to bring revenue growth. In addition, the company is also actively exploring application scenarios in fuel cells, medical devices, semiconductors, photovoltaics and other industries.

The company continues to expand overseas business, tap into lithium battery stocks and equipment transformation needs, and overseas lithium battery factories are still expanding production. Against the backdrop of rising overseas demand, Chinese lithium battery companies are also speeding up the construction of overseas factories. The company stepped up overseas market development efforts, and 24H1 overseas new orders increased 695.68% year over year. In the first half of the year, Japanese/German subsidiaries, leading Japanese car companies, and several leading European car companies provided equipment technology solutions, and it is expected that orders will be completed in the second half of the year. The company continues to explore the demand for lithium battery stock equipment transformation, actively provides equipment upgrade solutions for battery factories, and uses lower investment to achieve capacity increase and product transformation for battery plants, while also increasing the overall gross profit margin of the company's lithium battery orders.

Give the company a target price of 18.69 yuan to maintain a “buy” rating

Based on the fact that production expansion in the lithium battery industry is still slow, we lowered the company's 2024-2026 EPS by 0.61, 0.89, and 1.10 yuan respectively. Comparatively, the company's 25-year ifind unanimously expected an average PE value of 18.97 times. Considering the company's technological leadership in the field of laser welding and multi-industry platform layout, the performance growth rate was high. The company was given 21 times PE in 25 years, with a target price of 18.69 yuan, maintaining a “buy” rating.

Risk warning: Risk of rising raw material costs; risk of single customer dependency.