Incident: The company released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved revenue of 4.424 billion yuan, an increase of 9.48% year on year; realized net profit of 0.669 billion yuan, an increase of 8.28% year on year; realized deducted non-net profit of 0.654 billion yuan, an increase of 6.59% year on year. In 2024, Q3 achieved operating income of 1.558 billion yuan, up 10.06% year on year and 1.38% month on month; realized net profit of 0.244 billion yuan, up 17.91% year on year, down 0.03% month on month; deducted non-net profit of 0.231 billion yuan, up 13.74% year on year and 1.30% month on month.

Benefiting from improved semiconductor demand, performance achieved steady year-on-year growth: In the first three quarters of 2024, semiconductor market demand gradually improved, compounded by rapid year-on-year growth in the automotive electronics business, the company's revenue scale further expanded, and revenue and profit achieved steady year-on-year growth. Among them, Q3 revenue reached a record high in a single quarter. The company's overall gross margin for the first three quarters of 2024 was 31.02%, +0.15pct year on year; net margin was 15.13%, -0.11pct year on year. In terms of expenses, the company's sales, management, R&D and financial expense ratios for the first three quarters of 2024 were 4.08%/4.82%/6.99%/-1.23%, respectively, and the year-on-year changes were +0.06/-0.20/+0.48/+1.64pcts, respectively. Among them, the financial expense ratio and amount all showed year-on-year increases, mainly due to fluctuations in foreign exchange rates and a decrease in exchange earnings.

Downstream market sentiment picked up, and overseas business gradually recovered: in the first three quarters of 2024, demand in the downstream application sector picked up, and the company's automotive electronics business revenue increased 60% year on year, with sufficient growth in the later stages. At the same time, benefiting from the gradual recovery in consumer electronics and industrial market demand, consumer electronics and industrial products revenue grew by more than 20% year on year in the first three quarters of 2024. As domestic companies gradually break through the core technology of high-end products in chip design and manufacturing processes, and fill domestic technology gaps in more fields, the quality, performance, and technical standards of domestic power semiconductor products continue to improve, brand recognition gradually increases, opportunities for domestic substitution and overseas substitution are becoming more apparent, and the company's overseas market share is also expected to continue to increase. In 2024 H1, the company accelerated the construction of Vietnamese factories and overseas outlets, and accelerated the construction of innovative platforms and carriers such as overseas R&D centers. The company's industry position, brand value and global influence continued to improve. In Q2 2024, along with the end of the inventory removal phase in overseas markets, overseas customers increased their intention to purchase the company's products, and the company's overseas business sales revenue increased sequentially, driving the company's overall gross profit level to rise accordingly.

The semiconductor industry is recovering moderately, and we expect automotive SiC modules to be launched in batches: H1 in 2024, the semiconductor industry will recover moderately, and demand in downstream applications will pick up. Among them, the domestic automotive electronics and consumer electronics industries are in strong demand, and the industrial market is gradually improving. In response to this, the company continues to optimize the downstream structure and product structure in line with market demand, and actively develop domestic and overseas markets and customers. At the same time, the company's 8-inch, 12-inch G2 platform 40V SGT MOSFET chip, based on the Fabless mode, completed the 0.48mR~7mR series layout for motor drive applications such as automotive EPS, BCM, oil pumps, water pumps, etc., successfully passed vehicle level reliability verification, and entered mass production stage through some customer tests; completed the development of N60V/N100V/N150V/P100V vehicle-grade chips, and realized a variety of applications for in-vehicle DC-DC, wireless charging, headlights, load switches, etc. Mass production of products. At the same time, the company has developed automotive silicon carbide modules and reached testing and cooperation agreements with a number of Tier 1 and terminal car companies. It is expected that in 2025, the main drive silicon carbide modules produced nationwide will be launched in batches. The continuous introduction of silicon carbide products has laid a solid foundation for the company to achieve a one-stop supply of a full range of semiconductor power device products.

Maintaining a “buy” rating: The company's main products mainly include materials, wafers and packaging devices. The company's products are widely used in many fields such as automotive electronics, clean energy, 5G communications, security, industry, and consumer electronics. In 2024, the company actively promoted a number of key R&D projects and developed a variety of IGBT and silicon carbide module products. These products are expected to become an important growth pole for the company's 2024 performance. As the penetration rate of new energy vehicles in China continues to increase, demand in the automotive electronics market is expected to grow rapidly, the company's vehicle regulation business is expected to continue to benefit, and the room for the company's performance growth is expected to open up further. Considering that the industry's boom in the first half of the year fell short of expectations, we lowered our profit forecast for the full year. We estimate that the company's net profit for 2024-2026 will be 0.935 billion yuan, 1.155 billion yuan, and 1.417 billion yuan, EPS will be 1.72, 2.13, 2.61 yuan/share, and PE will be 28X, 23X, and 19X respectively.

Risk warning: Industry demand recovery falls short of expectations, downstream demand falls short of expectations, production capacity investment falls short of expectations, and market competition intensifies.