Incidents. The company disclosed its 2024 three-quarter report. 2024Q1-Q3 achieved operating income of 13.409 billion yuan, +2.11% year over year; realized net profit of 1.101 billion yuan, +11.63% year over year; realized net profit deducted from mother 0.965 billion yuan, +13.84% year over year. Among them, 2024Q3 achieved operating income of 4.4 billion yuan, -0.11%; realized net profit of 0.298 billion yuan, or -9.18% year-on-year; and realized net profit of 0.245 billion yuan, or -12.70% year-on-year.

Profitability remained steady, and sales and R&D expenses increased. 1) Profitability: 2024Q1-Q3's gross margin/net margin was 21.53%/8.82%, respectively, +1.29pct/+0.47pct; among them, the 2024Q3 gross margin/net margin was 21.42%/7.26%, respectively, +0.26pct/-0.83pct. 2) Fee control ability:

The 2024Q1-Q3 company's cost rate for the period was 12.66%, +1.75pct. Among them, the sales/management/finance/R&D expenses rates were 4.49%/2.69%/0.03%/5.45%, respectively, +0.98pct/+0.22pct/+0.05pct; the cost rate for the 2024Q3 company was 14.56%, +2.26pct, of which the sales/management/ financial/ R&D expenses rates were 5.00% /3.11, respectively %/ 0.89%/5.55%, +1.06pct/+0.25pct/+0.71pct/+0.24pct year-on-year.

Contract liabilities and inventory continued to grow, increasing procurement expenses and operating cash flow under phased pressure. As of the end of September 2024, the company's contract liabilities were 0.362 billion yuan, +13.43% year on year, and inventory was 3.065 billion yuan, +25.07% year over year; with 2024Q1-Q3, the company achieved a net cash flow of 0.258 billion yuan from operating activities, -75.58% year over year. The decline was mainly due to a year-on-year increase in cash for purchasing goods and receiving labor payments.

Accelerate the “1+N+X” international layout, and go overseas simultaneously with the whole machine+intelligent logistics. Since July 2024, the company's overseas pace has continued to accelerate, with overseas center layout, machine export, and intelligent logistics business going overseas at the same time. In terms of overseas center construction, the company's Oceania Center, European headquarters and European R&D center, and South American LLC have all been opened and operated to accelerate the global layout of “1 Chinese headquarters+N overseas centers+X global teams”. Currently, it has covered nearly 300 overseas agents in more than 100 countries and regions, and has the largest market share of joint products in 30+ countries and regions around the world, covering more than 95% of countries and regions along the “Belt and Road”. In terms of vehicle exports, the company's 24H1 overseas revenue accounted for 40%. On October 25, the 2024 vehicle export surpassed 0.1 million units and a shipping ceremony was held. In terms of intelligent logistics going overseas, the company's one-stop intelligent handling solutions participated in the LogiMAT SEA 2024 exhibition, and the i-series 1-3.5 ton balance weight AGV won the American International Design Excellence Award (IDEA). The company not only achieved a multi-dimensional product line layout from fuel vehicles to electric vehicles, from stand-alone products to one-stop intelligent logistics solutions, but also achieved global market coverage from entering emerging markets to consolidating key markets to expanding developed markets, promoting a multi-dimensional international strategic layout integrating brands, technology, products, and culture.

Profit forecasting and valuation. We expect the company to achieve operating income of 17.85/20.184/22.625 billion yuan in 2024/2025/2026, +2.17%/+13.08%/+12.09% year-on-year, and achieve net profit to mother of 1.417/1.677/1.961 billion yuan, a year-on-year increase of 10.85%/18.37%/16.93%, achieving EPS (diluted) 1.59/1.88/2.20 yuan/share. We gave the company a PE valuation of 13-15 times in 2024, with a reasonable value range of 20.68-23.86 yuan/share, and a reasonable market value range of 18.4-21.3 billion yuan, giving it a “superior to the market” rating.

Referring to the PB valuation, according to our reasonable value range, the company's 2024 PB was 1.76-2.03 times (the comparable company's PB range in 2024 was 1.55-2.36 times), and the valuation is reasonable.

l Risk warning. The company's overseas market expansion fell short of expectations; the company's development of new energy products fell short of expectations; the recovery of the manufacturing industry fell short of expectations; the risk of fluctuations in raw material prices; and the risk of exchange rate fluctuations.