occurrences

Jingyan Technology released its report for the third quarter of 2024: in the first three quarters of 2024, the company achieved operating income of 1.576 billion yuan, a year-on-year decrease of 3.08%; realized net profit of 0.1 billion yuan, a year-on-year decrease of 14.57%; and realized net profit deducted from non-mother of 0.09 billion yuan, a year-on-year decrease of 18.94%.

Key investment points

24Q3 performance is under pressure in the short term, and demand for downstream terminals fluctuates seasonally

2024Q3 achieved operating income of 0.574 billion yuan, down 31.97% year on year and 6.43% month on month; net profit to mother was 0.04 billion yuan, down 73.63% year on year, down 53.20% month on month; net profit without return to mother was 0.038 billion yuan, down 75.46% year on year and 53.46% month on month. In terms of profitability, in Q3 2024, the company achieved a gross sales margin of 25.09%, a decrease of 15.01pct; achieved a net sales margin of 6.91%, a decrease of 6.99pct. The reason for the pressure on performance is mainly due to seasonal fluctuations in demand for downstream terminals. The company is expected to pick up in the fourth quarter according to customer new product releases.

Folding machine penetration is accelerated, and Hinge MIM core suppliers have fully benefited

From an industry perspective, in recent years, smartphone manufacturers have continued to launch innovative products, such as high-end products such as folding screen phones and AI phones, to increase the value of stand-alone devices and stimulate consumer demand. Taking folding machines as an example, manufacturers continue to promote product innovation, including continuous optimization of methods such as horizontal folding, vertical folding, and tri-folding, improving the thickness and weight of the fuselage, improving battery durability, and improving screen creases. According to IDC forecasts, global foldable smartphone shipments are expected to reach 25 million units in 2024, an increase of 37.6% year over year. According to Counterpoint's forecast, global folding phone shipments will reach 0.1015 billion units in 2027. The accelerated increase in folding machine shipments will drive demand for MIM products made of key metal materials. According to estimates, the global mobile MIM market will reach $2.961 billion in 2026, with a CAGR of 8.36% in 2021-2026. As a key component of folding machines, we believe MIM is expected to continue to benefit from increased folding machine shipments.

Deeply cultivate the consumer electronics MIM industry and actively lay out liquid cooling and cooling business

The company's smartphone MIM products mainly include shaft MIM parts, camera holders, connector interfaces and other internal structural parts. The main customers include A customer, Samsung, Xiaomi, etc. Relying on its own technical advantages in the MIM field, the company continues to expand downstream of the industrial chain. In the field of folding screens, the company can mainly provide two types of products. One is MIM parts and components for folding screen hinges; the other is to provide hinges for folding screens. Currently, the mobile phone folding screen hinges produced by the company have been imported to well-known domestic Android brand customers. The company's revenue in the MIM segment mainly comes from consumer electronics products from end customers. The related revenue has certain seasonal factors. In the fourth quarter, the company will adjust according to the customer's response after the release of new products. In addition, the company is actively expanding its cooling business. Starting in 2022, it will gradually adjust from VC and heat pipes to liquid cooling. Liquid cooling is an emerging industry with large development space, and there are many new opportunities in this industry. At present, the company's liquid cooling products have generated sales revenue. Some cooling projects used in the fields of energy storage and edge computing servers have also achieved mass production and continued new product development and introduction of new customers. We believe that the company's MIM business revenue is expected to significantly benefit from the accelerated increase in folding machine penetration rate, and the liquid cooling business is also expected to benefit from the increase in domestic computing power infrastructure, becoming a new performance growth point.

Profit forecasting

The company's revenue for 2024-2026 is 3.01, 3.943, and 5.125 billion yuan, respectively, and EPS is 1.62, 2.14, and 3.15 yuan, respectively. The PE corresponding to the current stock price is 28.9, 21.9, and 14.9 times, respectively. Optimistic about the company's product upgrades and customer structure optimization in the context of domestic brand folding machine volume, and maintaining a “buy” investment rating.

Risk warning

Sales of folding screen phones fall short of expectations; industry competition increases risks; company R&D falls short of expected risks.