Incident: The company released its three-quarter report. 24Q1-Q3 achieved revenue of 0.203 billion yuan, -7.58% year over year; net profit to mother of -63.39 million yuan; after deducting non-net profit of -0.103 billion yuan, loss increased year-on-year. 24Q1-Q3 gross profit margin 27.39% (-4.34pcts year over year), net profit margin to mother -31.27% (-21.07pcts year over year).

Looking at Q3 alone, 24Q3 revenue was 75.36 million yuan, -2.40% year-on-year, +0.65% month-on-month; net profit to mother -20.91 million yuan; deducted non-net profit of -30.29 million yuan. 24Q3 gross profit margin 28.98% (YoY -6.76pcts, month-on-month +2.19pcts), net profit margin -27.74% (YoY -12.55pcts, month-on-month +3.02pcts).

R&D investment continues to be high, and cost control is good. 24Q3's R&D expenses were 32.06 million yuan, +1.48% year on year, 42.55%, +1.63pcts year on year; sales expense ratio 3.57%, -0.43pcts year on year; management expense ratio 13.26%, +0.39pcts year on year; financial expenses ratio -3.93%, -0.50pcts year on year. Inventory at the end of 24Q3 was 0.19 billion yuan, -10.24% year over year; contract debt was 3.38 million yuan, +32.24% year over year. 24Q3 operating cash flow was $-55.7 million, -854.78% YoY.

Profits are still under pressure, and they insist on building an optical chip IDM platform. Q3 profits continued to be under pressure, mainly due to intense competition in the laser market and a further decline in the price of products such as optical fiber coupling modules in the industrial market; at the same time, other earnings confirmed in the current period declined. 24Q1-Q3 accrued credit impairment losses of 23.74 million yuan and asset impairment losses of 37.49 million yuan, reducing profits by a total of 61.23 million yuan. During the CIOE in September, the company released 100GPAM4 VCSEL and supporting PD, 70mW, and 100mW silicon light sources. It has now formed a comprehensive communication optical chip product matrix, covering VR, SR, DR, FR and other distances, as well as single-wave 25G, 50G, and 100G rates. The company's second-phase platform is expected to be completed and put into operation in 2025, covering silicon integrated chips and multi-band laser chips. According to Wind, the wholly-owned subsidiary Research Institute currently holds shares in companies such as Weiqing Semiconductor (power semiconductors), Wuhan Gaoyue (optical devices), Ruike Jingchuang (PPLN crystals), Gallium Reixin (gallium nitride), uniform crystal optoelectronics (thin-film lithium niobate), and Zhongjiu Daguang (special high energy) to provide momentum for product technology development.

Profit forecast. We estimate that the company's revenue for 24-26 will be 0.297, 0.416, and 0.539 billion yuan, respectively; net profit to mother will be -0.056, 0.028, 0.081 billion yuan, and EPS of -0.32, 0.16, and 0.46 billion yuan, respectively.

We believe that as the leading IDM laser chip leader in China, Changguang Huaxin's future performance is expected to resume rapid growth along with the expansion of new business fields such as power, communications, and sensing. Referring to comparable company valuations, the company was given a dynamic PS range of 20-22x in 2025, corresponding to a reasonable value range of 47.22-51.94 yuan, maintaining a “superior to the market” rating.

Risk warning. Market competition increases risks, technological upgrading and iterative risks, and macroeconomic risks.