Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved revenue of 0.74 billion yuan, an increase of 9% over the previous year; net profit to mother was 0.04 billion yuan, an increase of 11.4% over the previous year. The results were in line with our expectations.

The performance was in line with expectations, and expenses were well controlled. In the third quarter of 2024 and the third quarter of 2024, the company achieved revenue of 0.28 billion yuan, an increase of 6.7% year on year; realized net profit of 0.01 billion yuan to mother, an increase of 46.9% year on year; performance maintained steady growth, in line with our positive expectations. In terms of expenses, in the third quarter of 2024, the company's sales expenses ratio was 10.9%, a year-on-year decrease of 0.7 pp; the management expenses ratio was 8.9%, a year-on-year decrease of 0.4 pp; the R&D expenses rate was 11.3%, a decrease of 0.2 pp; and the cost control was good. In terms of profit margin, in the third quarter of '24, gross margin and net margin were 40.7% (-1.6pp) and 3.4% (YoY +1pp), respectively. Profitability progressed steadily. Slight fluctuations were mainly due to changes in product structure and lower cost ratios.

Railway investment is speeding up, and the company's orders are growing. According to China Railway Group, in the first three quarters of 24, railways across the country completed fixed asset investment of 561.2 billion yuan, an increase of 10.3% over the previous year. The annual investment amount is expected to exceed 800 billion yuan.

The national railway construction mileage is expected to exceed 2,000 kilometers in '24, of which the high-speed rail mileage is expected to exceed 1,600 kilometers, and railway construction is expected to exceed the annual tasks. On the company side, the company's on-hand orders continued to rise. As of September 30, '24, on-hand orders were 0.75 billion yuan, an increase of nearly 20% over the previous year, and reached a record high for the same period. Furthermore, the company's contract debt reached 0.07 billion yuan in the first three quarters, a record high in the past five years.

Lay out civil aviation management and expand the airspace scheduling market. At the voice switching system technology exhibition event for small and medium-sized airports in the central and southern regions in September, the company's subsidiary Jiaxun Intelligent Aviation Technology showcased its nationally produced voice switching system. The civil aviation sector is the company's key layout area. This product launch marks that the competitiveness of the company's products has reached a first-class level, and it is expected to expand the second growth pole in the field of airspace scheduling in the future.

The “Belt and Road” went overseas smoothly, and cooperation with Huawei deepened. In '24, the company showcased its next-generation railway communication system (FRMCS) solutions at the Asia Pacific Railway and Rail Transit Exhibition; it also achieved two major breakthroughs in Mexico's nearly 10-million-scale railway construction projects and railway application projects. At present, the company has successfully delivered more than 400 railway station projects in more than 10 overseas countries, as well as the Zambia airport project, and the overseas market is expanding smoothly.

In July, the company signed a strategic cooperation agreement with Huawei for the Transportation Corps, and attended the Huawei Full Connectivity Conference with intelligent guidance products in September. The company and Huawei have achieved all-round cooperation in the field of transportation, which is expected to achieve a win-win situation at home and abroad.

Profit forecasting and investment advice. EPS is expected to be 0.16 yuan, 0.21 yuan, and 0.25 yuan respectively in 2024-2026, and corresponding dynamic PE will be 53 times, 40 times, and 33 times, respectively. The company is the core supplier of next-generation 5G-R communication systems for railways. As railway investment heats up and 5G-R iterative implementation, the company's performance is highly flexible and maintains a “buy” rating.

Risk warning: Risks such as railway investment falling short of expectations, new product expansion falling short of expectations, and 5G-R iteration falling short of expectations.