Incidents:

On October 25, the company released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 1.589 billion yuan, up 52.75% year on year, and net profit of 0.106 billion yuan, up 10.6% year on year; of these, the third quarter achieved revenue of 0.631 billion yuan, up 60.9% year on year, and net profit of 40.9988 million yuan, up 40.67% year on year.

Opinions:

The penetration rate of new energy vehicles continues to increase, and the company's new energy connectors have maintained rapid growth.

In the first half of 2024, production and sales of new energy vehicles in China reached 4.929 million vehicles and 4.944 million vehicles respectively, up 30.1% and 32% year-on-year respectively. The company's revenue growth rate during the same period was 47.81%.

According to data from the China Association of Automobile Manufacturers, China's NEV data continued to grow in the third quarter. Production and sales completed 1.307 million vehicles and 1.287 million vehicles respectively in September, up 48.8% and 42.3% year-on-year respectively, all of which reached record highs. Production and sales in January-September increased 31.7% and 32.5%, respectively.

Supported by demand for new energy vehicles, the company's revenue in the third quarter increased 60.9% year on year, while cost control improved markedly. Net profit to mother increased by 40.67% year on year, driving up profit levels in the first three quarters.

Customer repayments have increased, and operating cash flow has improved significantly. As downstream demand in the industry grew and prosperity increased, the company reduced costs and increased efficiency, and controlled expenses. Revenue and profit increased in the third quarter, effectively reducing the level of expenses, and its profitability improved markedly compared to the first half of the year. At the same time, customer repayments continued to be strengthened, and customer payments grew steadily and rapidly. Net operating cash flow in the first three quarters was 0.167 billion yuan, a sharp increase of 179.79% over the previous year, and significantly higher than the net profit returned to mother during the same period.

Profit forecast and investment rating: According to the 2023 annual report data, the company's new energy connectors account for more than 87% of revenue, of which new energy vehicles are the core revenue. Since 2024, China's NEV production and sales have maintained a high growth rate and reached a record high in September. The company's revenue growth rate during the same period was higher than the NEV growth rate. While revenue is growing rapidly, the company's profits and cash flow have continued to improve by improving quality and efficiency, reducing costs and expenses, and increasing repayment levels.

Supported by downstream new energy demand, we expect the company's net profit to be 0.154 billion yuan, 0.184 billion yuan, and 0.218 billion yuan respectively in 2024-2026, and EPS of 0.97 yuan, 1.16 yuan, and 1.37 yuan respectively. The corresponding PE is 44.2 times, 37.1 times, and 31.3 times, respectively. We selected China Aviation Optoelectronics, Aerospace Electric, and Yonggui Electric as comparable companies. Considering that the company still has a lot of room for growth, mainly new energy connectors, they have overestimated rationality, covered it for the first time, and gave it an “increase in weight” rating.

Risk warning: NEV production and sales fall short of expectations; macroeconomic recovery falls short of expectations; 5G progress falls short of expectations; prices of major products fluctuate sharply; data citation risks.