Incidents. The company released its quarterly report for the first three quarters of '24, achieving revenue of 4.82 billion yuan, +20.13% year on year; net profit to mother of 0.655 billion yuan, +36.45% year on year; deducted non-net profit of 0.62 billion yuan, +36.00% year on year; and gross profit margin of 32.84% (+0.53 PCT year over year). 24Q3 revenue in a single quarter was 1.725 billion yuan, +16.66% YoY, +1.12%; net profit to mother was 0.236 billion yuan, +26.10% YoY, +0.23% month-on-month; after deducting non-net profit of 0.227 billion yuan, +26.14% YoY and +3.27% month-on-month. 24Q3 gross profit margin 32.15% (YoY -0.79PCT, month-on-month -1.14PCT).

Expense control is good. 24 In the first three quarters, the company spent 0.257 billion yuan on R&D, +18.91% year on year, R&D expenses rate 5.33%, -0.05PCT; sales expenses ratio 5.58%, -0.50PCT; management expenses ratio 4.39%, -0.55PCT; financial expenses ratio 0.75%, -0.29PCT year on year. 24Q3's R&D expenses were 87.69 million yuan, +9.70% YoY, R&D expense ratio 5.08%, YoY -0.32PCT; sales expense ratio 5.44%, YoY -0.18PCT; management expense ratio 4.13%, YoY -0.43PCT; financial expense ratio 0.95%, YoY -0.01PCT. 24 Inventory for the first three quarters was 0.801 billion yuan, +16.37% year over year; contract debt was 80.31 million yuan, -3.26% year over year.

The high-speed communication line business is growing rapidly. The company's subsidiary Leting Zhilian has been deeply involved in the wire industry for decades. It has rich product development experience and process control experience, and some products have reached the international advanced level. Currently, Leting Zhilian has nearly 300 charter machines and more than 20 core wire machines. There are still hundreds of charter machines and dozens of core wire machines that have already been ordered. Demand for high-speed communication line orders continues to grow, and the machines are operating at full capacity.

Profit forecasting and investment advice. We expect the company's revenue for 2024-2026 to be 6.861 billion yuan, 8.195 billion yuan, 9.758 billion yuan, and net profit to mother of 0.926 billion yuan, 1.113 billion yuan, 1.317 billion yuan, EPS 0.74 yuan, 0.88 yuan, and 1.05 billion yuan, respectively. Referring to the company's historical valuation and the average valuation level of comparable companies, the company was given the 2024 dynamic PE area 28-30X, corresponding to a reasonable value range of 20.72-22.20 yuan, which is “superior to the market” rating.

Risk warning. Production capacity expansion fell short of expectations, and industry competition intensified.