Incidents. On October 30, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 0.603 billion yuan, a year-on-year increase of 25.07%; achieved net profit of 0.121 billion yuan, an increase of 11.73%; and realized net profit of 0.11 billion yuan after deduction, an increase of 20.30% over the previous year.

Revenue and net profit achieved double growth, and production line construction was accelerated. In the first three quarters of 2024, the company achieved revenue of 0.603 billion yuan, a year-on-year increase of 25.07%; achieved net profit of 0.121 billion yuan, an increase of 11.73%; and realized net profit of 0.11 billion yuan after deduction, an increase of 20.30% over the previous year. Looking at the third quarter of a year, the company achieved revenue of 0.207 billion yuan, an increase of 19.03% year on year; realized net profit of 0.039 billion yuan, an increase of 2.44% year on year; realized net profit of 0.035 billion yuan after deduction, an increase of 6.74% year on year. In the first three quarters of 2024, on the profit side, the company's gross margin was 34.49%, a year-on-year decrease of 0.32pct; on the expense side, the company's expenses ratio for the period was 13.33%, up 0.89pct year-on-year. Looking at Q3 alone, the company's gross margin was 35.1%, up 2.1 pct from month to month. The company's tablet display mask accounts for a relatively high proportion. The sales volume of the 2024Q3 flat panel display mask version and semiconductor mask version has achieved steady growth, and production line construction will continue to be accelerated. The company's Jiangsu Road Chip will start moving in equipment one after another at the end of 2024, and its target customers will continue to be covered according to process nodes, including well-known chip manufacturers, packaging plants, and related supporting manufacturers.

R&D investment continues to increase, and the localization process continues to be promoted. The company continued to increase investment in R&D. In the first three quarters of 2024, R&D expenses were 28.164 million yuan, an increase of 12.46% over the previous year. The company already has the production capacity of G2.5-G11 full-generation mask products, and can support the production lines of all generations of flat panel display manufacturers. It is the only domestic local mask company with G11 ultra-high generation. In the semiconductor field, the company has mastered the key core technology for manufacturing semiconductor mask plates in the 150nm process node and below, and has fully covered the needs of third-generation semiconductors, providing key upstream material localization support for the development of China's semiconductor industry. The R&D center focuses on manufacturing technology for semiconductor mask versions and phase shift mask plates with 130 nm to 28 nm process nodes, aiming to meet the needs of high-precision products such as analog chips, power discrete devices, and DRAM. At the same time, the company has established long-term and stable cooperative relationships with many well-known customers, including flat panel display customers such as BOE, Tianma Microelectronics, TCL Huaxing, and Longteng Optoelectronics, as well as leading domestic semiconductor companies such as Jingfang Technology, Huatian Technology, Tongfu Microelectronics, and San'an Optoelectronics. We believe that as the company continues to further develop mask product technology and continue to expand the semiconductor product field, the company's business expansion and localization process will be further accelerated.

Profit forecast and investment rating: We predict that the company's net profit for 2024-2026 will be 0.169/0.231/0.267 billion yuan, respectively. The current stock price corresponds to PE of 37/27/23 times, respectively. Based on the company's continuous improvement of product layout and further upgrading of mask product technology, we continue to be optimistic about the company's future performance development and maintain a “buy” rating.

Risk warning: Risk that demand in the tablet display and semiconductor industry falls short of expectations; risk of alternatives to technologies such as mask versions; risk of macroeconomic environmental fluctuations; risk of increased trade frictions.