Incident: The company released its quarterly report for the 3rd quarter of '24, and Q3 revenue and profit increased dramatically. 24Q1-Q3 achieved revenue of 0.916 billion yuan, +47.00% YoY; net profit to mother 0.146 billion yuan, +39.09% YoY; deducted non-net profit of 0.136 billion yuan, +47.09% YoY. 24Q1-Q3 gross profit margin of 33.78% (YoY +4.95pcts), net profit margin to mother 15.92% (YoY -0.90pcts). Looking at Q3 alone, 24Q3 revenue was 0.406 billion yuan, +74.52% YoY, +41.69%; net profit to mother was 66.29 million yuan, +99.90% YoY, +38.78% month-on-month; after deducting non-net profit of 64.36 million yuan, +118.86% YoY and +40.41% month-on-month. 24Q3 gross profit margin 36.23% (YoY +8.72pcts, month-on-month +3.68pcts), net profit margin 16.33% (YoY +2.07pcts, -0.34pcts month-on-month).

R&D investment continues to increase, and cost control is improving. 24Q3's R&D expenses were 23.65 million yuan, +57.55% year over year, R&D expenses rate 5.82%, -0.63 pcts year on year; sales expense ratio 1.48%, -0.01pcts year on year; management expense ratio 4.80%, -1.26 pcts year on year; financial expenses ratio 1.55%, year on year +1.87 pcts year on year. Inventory at the end of 24Q3 was 0.273 billion yuan, +22.80% year over year; contract debt was 13.87 million yuan, +595.66% year over year. 24Q3 operating cash flow was 29.82 million yuan, -31.32% YoY.

Customer orders have increased, and high-speed active product development and commissioning will be promoted. The company's revenue grew rapidly, mainly due to an increase in customer orders. The increase in inventory is mainly due to an increase in the company's sales orders and increased stocking. Currently, the company is promoting the development and commissioning of high-speed active products in an orderly manner.

Profit forecast. As one of the world's largest manufacturers of intensive connectivity products, Taichenguang benefits from demands such as AI computing power and 5G construction, and future revenue is expected to maintain steady growth. We estimate that the company's revenue for 2024-2026 will be 1.411, 2.107, and 2.827 billion yuan; net profit to mother will be 0.25, 0.393, and 0.544 billion yuan, respectively, and EPS of 1.10, 1.73, and 2.39 yuan respectively. Referring to comparable company valuations, the company was given a rating of “superior to the market” in the 2025 dynamic PE range of 45-50X, corresponding to a reasonable value range of 77.85-86.50 yuan.

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