Key points of investment

Incident: The company's 24Q1-3 revenue was 1.27 billion yuan, YoY -10.1%, net profit to mother 0.25 billion yuan, YoY -40.9%, net profit after deducting 0.23 billion yuan, YoY -39.1%; gross profit margin 48.1%, +3.8pct YoY, net interest to mother 19.4%, YoY -10.1pct; of which 24Q3 revenue was 0.36 billion yuan, +4.4%/-37.9% YoY, net profit to mother 57.99 Million yuan, -13.4%/-51.8% month-on-month, net profit after deducting 47.24 million yuan, -2.8%/-60.2% month-on-month; gross profit margin of 49.5%, +0.4/+2.9pct, net profit to mother 16.2%, and -3.3/-4.7 pct month-on-month.

Q3 slight reverse shipments declined month-on-month, and there was some recovery in Q4: the company's Q3 shipments declined a lot month-on-month, mainly due to the July-August vacation; the slight reverse unit price and gross margin remained stable.

The company officially sold balcony microstorage at the end of August, and it is expected to increase revenue performance in the future.

In the context of an increase in Q3 management R&D expenses and a decline in revenue, the cost ratio increased: the company spent 0.4 billion yuan during the 24Q1-3 period, the same cost ratio was 31.3%, the same 13.9pct, of which the Q3 period cost was 0.15 billion yuan, 24.3%/14.4%, and the cost ratio was 43%, 6.9/19.6 pct compared to the same period, mainly due to a large increase in management and R&D expenses, and a decrease in the combined revenue scale; 24Q1-3 net operating cash flow 0.07 billion yuan, same- 424.7%, including Q3 operating cash flow -0.09 billion yuan, 1023.3%/-206.8%; 24Q1-3 capital expenditure 0.66 billion yuan, same 253.5%, of which Q3 capital expenditure was 0.29 billion yuan, 257.4%/45.8% YoY; 24Q3 final inventory 0.99 billion yuan, 35.3% compared to the beginning of the year.

Profit forecast and investment rating: Considering that the company's Q3 shipment volume was affected by Europe, and the annual shipment volume may be affected, we lowered our profit forecast. We expect the company's net profit to be 0.45/0.7/0.92 billion yuan in 2024-2026 (previous value was 0.58/0.81/1.06 billion yuan), an increase of -13%/57%/30%. The corresponding PE is 37/23/18 times, maintaining the “buy” rating.

Risk warning: Increased competition and policies falling short of expectations.