Key points of investment

Revenue for the first three quarters of 24 yoy was +19.6%, and increased investment in future development of the layout put pressure on profits

In the first three quarters of 2024, the company achieved operating income of 0.54 billion yuan, yoy +19.6%; realized net profit of 0.062 billion yuan, yoy -39.2%; realized net profit deducted from non-mother 0.058 billion yuan, yoy -40.8%; achieved gross sales margin of 41.45%, -3.27pct year on year; and achieved a net sales margin of 11.44%. The pressure on the company's profit level in the first three quarters of 24 was mainly due to the increase in R&D expenses, sales expenses, and management expenses brought about by the layout of future sustainable development, namely increasing investment in new product development, expanding the talent pool, increasing market development efforts, implementing salary structure optimization to increase employee remuneration, and implementing equity incentive plans to increase share payment fees; financial expenses increased due to a decrease in interest income and exchange income from depositing raised capital accounts.

In a single quarter of 24Q3, the company achieved operating income of 0.2 billion yuan, yoy +22.0%, qoq +1.1%; realized net profit of 0.02 billion yuan, yoy -31.6%, qoq -6.0%; realized net profit without return to mother 0.018 billion yuan, yoy -38.5%, qoq -25.7%; achieved gross sales margin of 41.63%, month-on-month, -1.27pct; achieved net sales margin of 10.13%, month-on-month- 0.56pct

Refrigerant leak sensors are expected to benefit from European and American countries' low GWP refrigerant-related policies

European and American countries have introduced policies relating to low GWP refrigerants and will be implemented in 2025. In order to avoid situations where people suffocate due to combustion explosions due to low GWP refrigerant leaks or high-pressure leaks, the new refrigerant leak monitoring sensor is expected to become a standard configuration in refrigeration systems. The company laid out earlier and was engaged in the research and development of A2L/A3 refrigerant leak sensors. It has a strong competitive advantage in terms of technology and cost. The long-life refrigerant leak monitoring sensor based on NDIR (non-spectral infrared) technology has the advantages of rapid response, accurate measurement, and long-term operation without drift. At present, the company has obtained project targets from several well-known international customers and has begun batch supply. As the UL certification for the company's refrigerant leak monitoring sensor series products continues to be implemented, it provides a guarantee for the company's subsequent batch delivery. The business is expected to contribute to a certain increase in the company's performance in 2024.

Actively expand overseas business, build a factory in Hungary to seize overseas market opportunities

The company's overseas business continues to expand, and the company's HVAC, automotive electronics, industrial and safety, smart measurement, and scientific instruments have all achieved good development in overseas business. Located in the heart of Europe, Hungary is a transit point and distribution center for the European market, and has a good foundation for the automobile industry. The company invests in the construction of a production base in Hungary. On the one hand, it is beneficial to improve the company's response speed to European customer needs and better meet the orders and needs of customers in the European region; on the other hand, it helps the company to further improve international marketing channels, seize opportunities in overseas markets, explore potential customer needs, obtain incremental orders, promote the continuous and rapid development of foreign trade business, and improve the company's overall performance.

Profit forecasting and valuation

We expect the company's net profit to be 1.0, 130, and 170 million yuan respectively for 24-26, and the corresponding PE multiples for 24-26 will be 31, 24, and 18 times, respectively, to maintain a “buy” rating.

Risk warning

The development of emerging businesses fell short of expectations, the recovery of the HVAC business fell short of expectations, the development of the thermal industry fell short of expectations, etc.