In 3Q24, the company achieved revenue of 0.13 billion yuan (yoy: -13.17%, qoq: -12.26%), net profit of 0.115 billion yuan (year-on-year loss of 0.02 billion yuan, month-on-month increase of 0.013 billion yuan), net profit after deducting non-return to mother of -0.121 billion yuan (year-on-year loss of 0.021 billion yuan, increase in month-on-month loss of 0.013 billion yuan). Domestic mobile phone shipments declined month-on-month in the third quarter, and the overall inventory strategy of downstream mobile phone manufacturers was cautious, the momentum to pull goods weakened, and the company's revenue declined month-on-month. Against the backdrop of weakening market demand, competition in the RF industry intensified, the company's product prices were under pressure, compounded by changes in the 4G/5G product structure, 3Q24 gross margin turned negative, and quarterly losses increased. The company continues to promote mass production of new 5G solution products for brand customers. As the share of 5G product shipments further increases, gross margin is expected to rise steadily in the future. At the same time, the company is actively promoting iterative product upgrades. The market share of Android brand mobile phone customers is expected to gradually increase with the launch of new products, helping to achieve steady growth in business performance. The target price is 11.0 yuan, maintaining a “buy” rating.

3Q24 review: Market competition was intense. Quarterly gross margin changed for the first time in the third quarter, but demand in the mobile phone market did not improve significantly. IDC data showed that China's smartphone shipments fell 4.0% month-on-month in 3Q24, compounded by increased competition in markets such as 4G/ODM. The company's revenue was -13.17%/-12.26%, respectively, and gross margin fell to -5.19% (yoy: -14.88pct, qoq: -7.05pct). As the competitive situation in the market has not improved significantly, the company's 4Q24 gross margin is expected to remain under pressure. The company continued to strengthen cost control throughout the year. The total cost of 3Q24 (sales+management+R&D) was 0.098 billion yuan (yoy: -19.69%, qoq: -8.50%), of which R&D expenses were 0.069 billion yuan (yoy: -20.85%, qoq: -7.90%). By the end of the third quarter, the company's inventory was 0.478 billion yuan, a decrease of 0.012 billion yuan from the end of the second quarter, and the inventory remained at a relatively healthy level.

4Q24&2025: Demand in the domestic Android market is expected to recover. Concerned about the pace of mobile phone brand customer introduction, the intensive release of new domestic Android devices in the fourth quarter, and downstream procurement momentum may resume. We expect the company's 4Q revenue to resume month-on-month growth. Looking ahead to the next 25 years, we are optimistic that AI innovation will drive the next wave of new 5G products, and revenue is expected to grow faster: 1) L-pamID has achieved small-scale mass production, while the verification and introduction of mobile phone brand customers continues to advance, and large-scale shipments are expected to begin in 25; 2) Along with the further decline in the price band of mobile phones using the N79 band, the company's dominant product, 5G dual-band LiF, is expected to achieve good growth and accelerate the company's penetration among mobile phone brand customers; 3) The Phase8L solution layout is expected to lead the country. Mass production and shipment will begin in '24, and further volume is expected in '25. Furthermore, the company successfully introduced overseas customers, and the subsequent official launch will contribute to additional volume.

Investment suggestion: Target price is 11.0 yuan, maintaining the “buy” rating. Demand in the Android phone market is recovering slowly, and competition in the industry is fierce. We lowered the company's 24/25/26 revenue to 0.54/0.72/1 billion yuan (original value: 0.61/0.84/1.17 billion yuan), considering the continued introduction of the company's brand customers, and the imminent launch of new products such as Phase7LE/Phase8L LPAMID, giving 7.0x 25PS (comparable average of 3.8x), target price 11.0 yuan ( Previous value: 10.0 yuan, corresponding to 7.5x PS in 24 years), maintaining a “buy” rating.

Risk warning: New product development falls short of expectations, market competition intensifies, and market development falls short of expectations.