Incident: The company released its report for the third quarter of 2024. In 3Q24, the company achieved operating income of 1.009 billion yuan, a year-on-year increase of 29.48%, achieved net profit of 0.063 billion yuan, a year-on-year decrease of 18.91%, and realized net profit deducted from non-mother 0.073 billion yuan, an increase of 13.80% year-on-year.

The gross margin declined year on year, and the cost ratio declined during the period: 3Q2024 company's gross profit margin was 26.91%, -3.65pct; 3Q24 sales expense ratio was 6.27%, -0.88pct; management expense ratio was 6.85%, -0.69pct; R&D expense ratio was 3.25%, -0.02pct year on year.

Adequate production capacity, storage system upgrade: On August 23, 2024, the company issued a special report notice on the storage and actual use of funds raised by convertible bonds. The announcement showed that the company had completed the construction of a transmission shaft assembly project for cars with an annual output of 2.4 million and the transformation of an intelligent production line technology project with an annual output of only 1.5 million precision wheel bearing units. At the same time, the company's global warehouse network system is already in operation. In the future, the company will continue to invest resources and energy to continuously improve the level of warehousing management, provide customers with faster, more accurate and more reliable supply chain services, improve existing warehousing efficiency at the process, system and management levels, and use the North American warehouse as a pilot to further apply the sales forecasting model to the overseas warehouse level, thereby reducing costs and improving order delivery capabilities.

Investment advice: We expect the company to achieve net profit of 0.322/0.377/0.433 billion yuan in 2024-2026.

The corresponding PE was 11.25/9.62/8.39 times, respectively, maintaining the “gain” rating.

Risk warning: Overseas exports fall short of expectations; industry competition increases risk; risk of exchange rate fluctuations.