Incident: The company announced results for the first three quarters of 2024. 2024Q1-Q3 revenue was 122.13 billion yuan, +32.5% year over year, and net profit to mother was 3.06 billion yuan, +0.6% year over year; on a quarterly basis, 24Q3 company revenue was 43.55 billion yuan, +21.1% year over year, and net profit to mother 1.55 billion yuan, +1.2% year over year.

The consumer electronics and automotive electronics business strengthened, and net profit to mother improved markedly, 24Q3's revenue was 43.55 billion yuan, +21.1%, +3.4% month-on-month, and net profit to mother 1.55 billion yuan, +1.2%, and +70.3% month-on-month; the company's gross margin was 8.5%, +1.6PCT month-on-month, and net profit margin was 3.6% month-on-month, and +1.4PCT month-on-month. We thinkmergers and acquisitionsJeep's financial expenses, depreciation, and pressure on the energy storage business put potential pressure on the company's performance, but the rise in downstream prosperity such as tablets, smartphones, and automobiles drove the company's new and old businesses to drive performance growth:

According to IDC, 24Q3 shipped 12.6 million tablets to major overseas customers, +1.4% year over year, and +2.4% month over month;

According to Canalys, 24Q3 overseas major customers shipped 54.5 million mobile phones, +9% year over year, while Xiaomi shipped 42.8 million units, +3% year over year;

In 24Q3, BYD sold 1.135 million vehicles, +37.7% year-on-year.

The company is expected to work in multiple directions to achieve growth

We believe that the company has formed a three-way layout of consumer electronics+automotive electronics+AI, and is expected to reap growth in the future:

In consumer electronics: On the one hand, major overseas customers promote the penetration of AI and new designs into mobile phones. The company is expected to continue to make further profits after acquiring Jeep, and on the other hand, release new tablets, and the company's related business is expected to continue to make profits;

In terms of automotive electronics: The parent company's sales are growing steadily and the intelligent process is accelerating. Shipments of the company's smart cockpits, smart driving systems, thermal management, sensors and other products are expected to continue to grow. In addition, new products such as smart suspensions will gradually begin to be supplied, and the company's automotive electronics are expected to enter a channel of rising volume and price;

AI: Global demand for AI computing power continues to grow. The company has cooperated with Nvidia to build a full set of AIDC solutions such as AI servers, liquid cooling, and power management, and launch industrial robots such as AMR. These layouts are expected to contribute new momentum to growth

Profit forecast and investment rating: Considering the financial expenses, impairment, and pressure on the energy storage business caused by the company's merger and acquisition of Jeep, but the three consumer electronics, automotive electronics, and AI computing power businesses all have considerable growth potential, we adjusted the company's projected net profit for 2024-2026 from 5.04/6.89/8.02 billion yuan to 4.64/6.14/7.63 billion yuan. The closing price of PE on November 5, 2024 was 15.1/11.5/9.2 times, maintaining the “buy” rating.

Risk warning: downstream demand falls short of expectations; customer concentration is high; acquisition synergy falls short of expectations.