Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 4.974 billion yuan, a year-on-year increase of 17.46%; realized net profit to mother of 0.742 billion yuan, an increase of 24.13% year on year; realized net profit without deduction of 0.681 billion yuan, an increase of 15.60% year on year.

Net profit to mother grew at a high year-on-year rate, and profitability increased significantly. Among them, 24Q3 achieved revenue of 1.725 billion yuan, +8.40% year over year; realized net profit of 0.292 billion yuan, +44.74% year over year; realized net profit of 0.263 billion yuan without return to mother, +32.22% year over year, with a significant increase in profitability.

Sales margins have recovered and are expected to continue to improve. 24Q3 achieved a gross sales margin of 29.75%, +0.96pct/+2.09pct, respectively; achieved a net sales margin of 17.34%, and +4.57pct/+3.20pct month-on-month, respectively. The 24Q3 sales/management/R&D/finance expenses ratio was 1.18%/6.77%/5.48%/-1.82%, respectively, -0.05pct/+1.23pct/+1.16pct/-3.02pct, and +0.12pct/+1.14pct/-0.20pct/-2.43pct, respectively. The company's profit margin has been repaired. We expect changes in product structure, and improvements in raw material prices, shipping costs, and overseas exchange rates.

New energy medium and large products are progressing in an orderly manner, and the global customer layout is gradually improving. The company continues to accelerate its layout in the field of new energy. The product structure extends from small to medium components to the core components of NEV three-electric systems, etc., and related large parts categories are expected to become a new growth point for the company. The company strengthened its global layout, with customers covering Asia, America and Europe in a balanced manner, and launched the Malaysia project and the second phase production base project in Mexico to further support global customers and provide a strong guarantee for the company's performance growth.

Equity incentives highlight business confidence and guarantee the long-term development of the company. In October '24, the company announced an equity incentive plan. The incentive plan grants 857 incentive recipients, accounting for 10.56% of the company's total number of employees; it is intended to grant the incentive target 8.032 million shares of restricted shares, accounting for about 0.82% of the company's total share capital. The company's equity incentives cover a wide range of areas, fully bind the interests of core employees, motivate personnel, and ensure the long-term development of the company.

Investment advice: The company's production capacity continues to expand, the customer structure is excellent, and the overseas layout is actively expanding. In view of the restoration of the company's profitability, we raised the company's profit margin on sales of some products in 2024-2026. We expect the company's revenue of 7.06/8.6/10.97 billion yuan in 2024-2026, corresponding to net profit of 1.04/1.26/1.58 billion yuan. The current market value corresponding to 2024-2026 PE is 14.6/12.0/9.6 times, maintaining the “buy” rating.

Risk warning: Prices of raw materials have risen, production capacity has fallen short of expectations, customer expansion falls short of expectations, and sales of new energy vehicles have fallen short of expectations.