Incident: The company released its 2024 three-quarter report. In the first three quarters, it achieved revenue of 1.932 billion yuan, +6.90% year on year, net profit to mother of 0.072 billion yuan, or -53.51% year on year after deducting non-net profit of 0.045 billion yuan, year-on-year -65.82%, gross profit margin of 16.03%, year-on-year.

Revenue growth, multiple factors affected profit pressure: 3Q2024 achieved revenue of 0.806 billion yuan, +19.65%/18.60% month-on-month, and realized net profit of 0.032 billion yuan, -49.53% /month-on-month +21.46%, net non-net profit 0.019 billion yuan, -65.49% y/month-on-month +18.78%, gross profit margin 16.38%, year-on-year -2.84pct/month-on-month +1.50pct. The company's revenue growth and profit are under pressure, and gross profit has declined. Our judgment is that the company's sales/management/R&D/finance/total expense ratios for the 3Q2024 single quarter were 0.85%/4.26%/4.64%/1.77%/11.53%, respectively, with year-on-year changes of -0.08/-0.05/-0.78/+2.21/+1.30pct, respectively. More short-term R&D projects led to high R&D investment, with the aim of laying a good foundation for future development. Furthermore, depreciation and amortization generated by the headquarters building and Jiangxi Industrial Park, and interest accrual on convertible bonds have all put pressure on the company's profits.

Focus on the long-term growth space of AR glasses: Meta demonstrated the AR prototype Orion for the first time, opening up the AR+AI long-term imagination space. The consumer-grade AR glasses “INMOGO” produced by the company for the AR glasses brand Imaging Technology were launched in September 2023. Imaging Technology will hold a new product launch conference on November 29 and release INMO Air 3 and INMO Go 2. The company is expected to enjoy broad growth space in the long term with a good industrial chain card.

Investment advice: The company's performance is under pressure, and the long-term AR business space can be expected. We expect the company's net profit to be 0.099/0.153/0.192 billion yuan in 2024-2026, EPS is 0.28/0.44/0.55 yuan, and the corresponding PE is 56.84/36.83/29.45 times, maintaining the “increase” rating.

Risk warning: Consumer electronics demand recovery falls short of expectations; AR industrialization falls short of expectations; AI hardware demand falls short of expectations.