Incidents. On October 29, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 0.651 billion yuan, a year-on-year increase of 6.54%; realized net profit of 0.14 billion yuan, a year-on-year decrease of 19.28%; and realized net profit of 0.118 billion yuan after deduction, an increase of 1.36% over the previous year.

Revenue grew steadily in the first three quarters, and the profit side was briefly under pressure. In the first three quarters of 2024, the company achieved revenue of 0.651 billion yuan, a year-on-year increase of 6.54%; realized net profit of 0.14 billion yuan, a year-on-year decrease of 19.28%; and realized net profit of 0.118 billion yuan after deduction, an increase of 1.36% over the previous year. Looking at the single quarter, the 2024Q3 company achieved revenue of 0.222 billion yuan in a single quarter, up 1.07% year on year and 4.62% month on month; realized net profit of 40.6705 million yuan, down 29.72% year on year and 24.72% month on month; net profit without deducted back to mother was 33.2764 million yuan, up 0.75% year on year, down 26.64% month on month. On the cost side, the company's sales expenses and management expenses control level gradually increased in the first three quarters. The sales expense ratio was 4.78%, a year-on-year decrease of 1.07pct; the management expense ratio was 4.22%, a year-on-year decrease of 1.41pct.

Continue to increase investment in R&D and actively promote the “dual engine” strategy. In the first three quarters of 2024, the company incurred R&D expenses of 78.7694 million yuan, an increase of 17.48% over the previous year, and the R&D expenses rate was 12.11%. The company actively promotes the “dual engine” strategy and focuses on the instrument and component business. The domestic optical microscope and scientific instrument industry have been adjusted since this year, but the company has maintained a strong competitive advantage. With China's implementation of the scientific instrument power strategy and the gradual implementation of the scientific instrument equipment renewal policy, the optical microscope business is expected to continue to gain strength. At the same time, the company is actively developing overseas markets. Currently, it is mainly located in North America, Europe, Japan and South Korea, while increasing its business promotion in Asia, Africa, and Latin America. The company has established localized professional teams in key regions, and at the same time strengthened cooperation with overseas dealers, increased “brand going overseas”, and accelerated the level of internationalization. We believe that as the trend of localization of scientific instruments deepens, the company continues to increase investment in R&D, promote the “2+2” business layout, and optimize the product structure, and the company's performance is expected to grow steadily in the future.

Profit forecasting and investment ratings. We expect the company's 2024-2026 net profit to be 0.208/0.315/0.416 billion yuan, and the 2024-2026 EPS will be 1.87/2.84/3.74 yuan, respectively. The current stock price corresponds to 52/34/26 times PE, respectively. As the company continues to expand the high-end optical microscope market and accelerate the upgrading of medical optical technology, we continue to be optimistic about the company's future performance development and maintain a “buy” rating.

Risk warning: risk of technological innovation; risk of exchange rate fluctuations; risk of changes in the international trade environment; risk of market expansion of new production capacity.