Incident: The company released its report for the third quarter of 2024. The company achieved operating income of 0.269 billion yuan, +50.48% year over year, net profit to mother 0.02 billion yuan, or -42.25% year on year; net profit without return to mother was 0.018 billion yuan, or -36.80% year over year. The third quarter of 2024 achieved operating income of 0.087 billion yuan, +37.65% year on year, net profit to mother 0.005 billion yuan, or -34.90% year on year; net profit after deducting non-return to mother of 0.004 billion yuan, or -31.78% year on year.

In terms of profitability: the company's gross profit margin for the first three quarters was 28.76%, year-on-year -8.52pct, net interest rate -11.95pct; the company's gross profit margin for the third quarter was 24.76%, -4.72pct, net interest rate 5.32%, year-on-year -5.94pct; balance sheet: inventory for the first three quarters of 24, 0.117 billion yuan, annual report data for 23 years. 0.209 billion yuan; cash flow statement: The company received 0.203 billion yuan in cash from selling products and providing services in the first three quarters of 24, compared to 0.146 billion yuan for the same period in 23; cash from purchasing goods and receiving labor payments was 0.151 billion yuan, and the data for the same period of 23 was 0.106 billion yuan. The company's revenue increased, but the decline in profit margin was mainly due to the company's product restructuring. Inventory increased, fixed assets increased, and the cash flow for purchasing and selling products was better than the same period last year. Considering the company's acquisition of Guardian Machinery, the establishment of civilian goods companies such as Shanghai Jiadinan Aviation Technology Co., Ltd. and Shanghai Chaozhuo Qiyi Materials Co., Ltd. in 23 may indicate that the company's revenue in the civilian goods sector has increased significantly.

The military and the civilian population are making concerted efforts, and the prospects for the application of new technology are promising. In the military product field, the company continues to cooperate with the Military Engine Research Institute to verify the reliability of maintenance. The company targets the design and manufacturing business of newly expanded military aircraft and nuclear industry parts, component tooling and composite molds; in the field of civilian products: 1) New energy vehicles:

The company's new energy auto parts production line in Shanghai has been put into operation; 2) industrial parent machine: the company is accelerating the transformation to high-end products to achieve localized replacement of imported products; 3) PV and semiconductors: on the basis of completing the delivery of the first batch of customized products, it is focusing on obtaining more orders.

Investment advice: The company's net profit for 24/25/26 is expected to be 0.048/0.102/0.125 billion YOY +238.0%/+112.1%/+21.7%. Give it a “buy” rating.

Risk warning: Product batch production falls short of expectations; military orders fall short of expectations; competition in the civilian explosion industry intensifies.