Three-quarter report results: achieved revenue of 1.388 billion yuan, yoy +6.5% in the first three quarters of 24; net profit to mother of 0.263 billion yuan, yoy +10.3%; net profit of 0.252 billion yuan, yoy +16.4%. Among them, Q3 achieved revenue of 0.478 billion yuan, yoy +5%, +2.1% month-on-month; net profit to mother of 0.096 billion yuan, yoy +29.7%, or +5% month-on-month.

Q3 Revenue and profit both increased, and new amorphous production lines contributed to an increase

On the revenue side, the company achieved 1.388 billion yuan, yoy +6.5% in the first three quarters of 24, and 0.478 billion yuan in a single quarter in Q3, +5%/+2.1% year-on-month. Revenue for the first three quarters and Q3 both achieved year-on-year growth. We believe that the main reason was that the amorphous production line was fully produced and sold. At the same time, the Q3 “amorphous production line with an annual output of 0.015 million tons” was put into production, and amorphous shipments increased further.

On the profit side, the company's Q3 gross profit margin was 31.80%, +1.92/+1.54pct; the period expense ratio was 11.38%, +0.51pct month-on-month, slightly flat; in the end, it recorded a net interest rate of 20.07%, +3.82/+0.55pct month-on-month. The amorphous economy continued, and the profit level further strengthened.

In terms of cash flow, the company achieved net operating cash flow of 0.203 billion yuan in the first three quarters of 24, yoy +35.2%. Sales repayments increased, and cash flow improved significantly.

The amorphous market continues to expand, and nanocrystals & magnetic powder cultivate new growth poles

Amorphous sector: Amorphous transformers save 60% to 80% less energy than silicon steel transformers at no load, and there is plenty of room for replacement.

On the domestic side, the penetration of amorphous transformers is being boosted by the increase in energy efficiency standards for distribution network transformers; in Southeast Asia, power grid construction is relatively backward, and electricity consumption is growing rapidly; Europe and the US are actively promoting energy efficiency standards for transformers. As the world's largest amorphous production base, the company's original production capacity is 0.09 million tons, maintaining full production and sales, and is stable. The “amorphous production line with an annual output of 0.015 million tons” was put into production in 24Q3. The company's current production capacity has reached 0.105 million tons. The production capacity advantage has been further expanded, and Q4 growth can be expected.

Nanocrystalline & magnetic powder sector: Under the demand for increased AI computing power, the trend of integrated inductance is clear. Coupled with the boom transmission in sectors such as smart home appliances and new energy, there is broad room for inductive materials to grow. The company continues to improve the stability and reliability of its products. 24H1, quality-driven sales of magnetic powder and nanocrystalline products have risen sharply. At the same time, magnetic powder and nanocrystalline products have been recognized by customers in the fields of optical storage, new energy vehicles, etc., waiting for further release of production capacity and product expansion, and saving continuous growth potential.

Investment advice: As a leader in the amorphous materials industry, the company's performance is expected to maintain rapid growth with the release of production capacity and the release of new products. We expect net profit to be 0.357/0.435/0.499 billion yuan respectively for 24-26, corresponding to the closing price of November 1 PE of 28/23/20X, respectively, to maintain a “buy” rating.

Risk warning: risk of technological upgrading and iteration; risk of core technology leakage; risk of shortage or loss of core technical personnel; risk of downstream demand falling short of expectations; risk of raw material price fluctuations.