Incident: The company released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved revenue of 6.394 billion yuan, an increase of 14.31% year on year; realized net profit to mother of 0.533 billion yuan, an increase of 3.08% year on year; deducted non-net profit of 0.41 billion yuan, a year-on-year decrease of 16.91%. In 2024, the Q3 company achieved operating income of 2.648 billion yuan, up 17.78% year on year and 40.26% month on month; realized net profit of 0.33 billion yuan, up 2.06% year on year, up 547.03% month on month; realized deducted non-net profit of 0.257 billion yuan, down 26.07% year on year and up 647.43% month on month.

Q3 revenue hit a quarterly high, with a sharp month-on-month increase on the profit side: in Q3 of 2024, the company's revenue grew rapidly month-on-month and hit a record high in a single quarter; at the same time, the profit side achieved significant month-on-month growth, and the overall business situation was steady, moderate and positive. In terms of profitability, the company's overall gross margin for the first three quarters of 2024 was 20.80%, -1.76pcts year on year; the net margin was 8.26%, -0.92pct year on year. The impact of the decline in gross margin on net profit was offset by a sharp increase in other earnings. In terms of expenses, the company's sales, management, R&D and financial expenses for the first three quarters of 2024 were 0.77%/4.53%/8.02%/0.27%, respectively, and the year-on-year changes were +0.01/+0.73/+0.47/ -0.20pct, respectively. Among them, the management fee rate and amount all showed year-on-year increases, mainly due to the year-on-year increase in labor costs and the increase in overseas base expenses.

Benefiting from AI empowering smart terminals, the demand for connectors continues to rise: Currently, the leapfrog development of AI technology has not only significantly improved the performance of smart terminal devices, but also changed the way they interact from touch to natural methods such as voice and gestures, but also provides users with a more intuitive and convenient user experience, and pushes society to rapidly enter the intelligent era. With the advancement of AI technology and the improvement of the smart terminal user experience, the requirements for hardware configuration have also increased. The increase in the complexity of AI algorithms, in addition to requiring higher performance processors and larger data storage space, has new requirements for terminal device data signal connectivity, battery life, and camera and audio hardware. In the field of consumer electronics smart terminals, the company maintains active cooperation with major domestic and foreign customers, continuously developing product types and improving product technical capabilities. By the end of 2024Q3, the company had verified a number of new RF and precision structural products on the client side, striving to obtain more new product cooperation opportunities with customers. At the same time, the company actively promoted the second growth curve business development, further expanded related product capabilities and business scale, and continued to deepen cooperative relationships with important customers such as North American customers.

LCP products have been introduced to major North American customers, and the scale of the satellite communication business has gradually expanded: in terms of high-precision connectors, the company relies on its technical advantages such as radio frequency technology and magnetic materials, and focuses on developing high-end segments such as high-speed connectors, magnetic connectors, and BTB connectors. The technical level of related products is well recognized by customers. In addition to the consumer electronics market, these products have also achieved rapid breakthroughs in the commercial satellite communication field, and the business scale continues to expand; the company's high-frequency high-speed connectors have achieved breakthroughs in the server and automotive fields. It is expected that 2026 will have its own technology products in industry and aviation There will be new breakthroughs in the field. In terms of LCP and millimeter wave antenna modules, the company's self-developed LCP film and LCP high-frequency FCCL have passed the US UL certification. The high-frequency transmission performance and reliability are at the leading level in China, and have served major customers in North America. In terms of UWB business, the company has made extensive technical reserves and patent layouts. Related products have been successfully applied to IoT and smart home scenarios such as smart car keys, smart door locks, smart medical devices, smart security, smart audio, etc., and realized the company's business expansion in the field of Internet of Things/smart home applications. In the automotive business, the company has increased its customer and business development efforts, and obtained supply qualifications for domestic and foreign OEMs such as Tesla, Volkswagen, Dongfeng Honda, GAC Honda, FAW Hongqi, FAW Pentium, Changan Automobile, Rivian, American Visteon, etc., and the scale of the company's automobile business is expanding day by day.

Maintaining the “gain” rating: The company's main products include antennas and modules, wireless charging and modules, EMI\ EMC devices, high-precision connectors, automotive interconnection products, passive components, etc. The company's products are widely used in consumer electronics, Internet of Things/smart homes, commercial satellite communications, smart cars, etc., and its customers cover world-renowned technology companies. By the end of 2024Q3, the company has verified a number of new RF and precision structural products on clients. At the same time, the company is actively promoting the second growth curve business, further expanding related product capabilities and business scale, and continuing to deepen cooperative relationships with important customers such as major North American customers.

With the introduction of innovative technologies and innovative forms such as AI applications and folding screens in consumer electronics products, and the advent of the next renewal cycle, consumer electronics market demand is expected to gradually improve marginally, and the company's performance is expected to recover further. Considering that the industry's boom in the first half of the year fell short of expectations, we lowered our profit forecast. We expect the company's net profit for 2024-2026 to be 0.735 billion yuan, 0.953 billion yuan, and 1.08 billion yuan respectively, EPS 0.76, 0.99, 1.12 yuan/share, and PE is 34X, 26X, and 23X, respectively.

Risk warning: Market competition increases risk, downstream demand falls short of expectations, customer concentration risk, and exchange rate fluctuations affect it.