Incident: The company's public account announced the opening of the Shanghai R&D Center, adding a new layout to the global strategic layout.

The global layout of hard core technology is gradually improving. The Shanghai R&D Center focuses on the three major R&D directions of self-developed core technology products and solutions, and invests heavily in modular instrument products and high-performance test power products. The desktop instrument provides a convenient and efficient experience. The modular platform gives users flexibility and expandability, while the comprehensive solution integrates industry experience and technology accumulation to fully support customer needs. Through the innovative thinking of universities and extensive channel coverage, the three work closely together to explore and advance the frontiers of technological development.

Looking back on performance, benefiting from the release of high-end products and the effects of scale, the company's performance gradually accelerated. Revenue side: Self-developed core base platform, high bandwidth, high resolution and solution products continue to break through, and revenue is growing steadily. (1) In the third quarter of 2024, products equipped with the company's core self-developed core technology platform accounted for 89.00%, +13.5pct year-on-year, which played an important supporting role in the company's revenue growth. (2) 2024Q3, sales revenue of the company's DHO series high-resolution digital oscilloscope (12 bit vertical resolution) increased 71.21% year-on-year, and continued to grow rapidly. (3) Sales revenue of Q3 high-end digital oscilloscope products (bandwidth ≥2 GHz) accounted for 41.83% of overall digital oscilloscope sales revenue, up 18.45 pcts year on year, and sales revenue +144.93% year over year. (4) Q3 Solution's sales revenue was 30.5645 million yuan.

Profit side: High-end and self-developed core base platform products drive an increase in gross margin, continuous research and development, and good control of the cost ratio during the period.

(1) The gross margin level continues to improve. The gross profit margin of the Q3 company was 60.84%, +2.60pct year on month, and the company's gross margin continued to increase. Among them, the gross margin of digital oscilloscope products was 61.28%, +1.12pct year on year, and +3.19pct month-on-month. High-end and self-developed core technology platforms contributed significantly to the gross margin of digital oscilloscope products. (2) R&D investment continued to increase. 2024Q3's R&D expenses were 0.061 billion yuan, and R&D employee salaries, R&D material consumption, and R&D equipment depreciation all increased compared to the same period last year. Since 2024, the company has built R&D centers in Xi'an and Shanghai, increased investment in technology research and development, and accelerated product development. (3) The fee rate decreased during Q3.

Looking forward to the future, high-end products have received orders from strategic customers, and Endurance Electronics will continue to increase its performance, and the high-end process will continue to accelerate, and we are optimistic about the company's long-term development. According to the announcement, ① the company's DS80000 series high-end digital oscilloscope achieved volume sales.

Not only have we received orders from strategic customers in China, but target customers are enthusiastic about testing, and we have already entered the harvest period for this product.

The company's DHO series high-resolution digital oscilloscope highlights its strategic advantages. The product covers entry-level to mid-range, 2 channels to 8 channels, 70 MHz bandwidth to 1 GHz bandwidth, and the replaceability of the original 8-bit old products has been verified by the market. ② The amount of in-hand orders accepted by NISU Electronics in 2024 is 69.3243 million yuan. Puyuan Precision Electric has brought new business opportunities at home and abroad to NISU Electronics, and some business opportunities have already been converted into orders, delivering solutions to customers one after another, and a synergy effect has emerged.

Profit forecast and valuation: Considering that the company maintains a high level of investment in R&D and increases in plant depreciation, we lowered our 24-25 profit forecast and introduced a 26-year profit forecast. The estimated net profit for 24-26 is 0.106/0.175/0.235 billion yuan, respectively (the value forecast was 0.212/0.301 billion yuan 24-25 years ago), and the corresponding PE is 84, 51, and 38X, respectively. Comparable to the companies Dingyang Technology and Kunheng Shunwei, the average PE value for 24-26 was 39, 30, and 23X. Considering that the company has built R&D centers in Xi'an and Shanghai and increased investment in technology research and development, employee remuneration, R&D material consumption, and R&D equipment depreciation have increased significantly, but the high-end process continues to break through. It is expected that the company's profitability will continue to increase, revenue and profit will continue to grow rapidly, have growth potential, and have excellent product revenue volume and product parameter levels. It is subject to valuation negotiations, and downgraded to an increase in holdings rating.

Risk warning: the risk that the implementation of fixed increase projects falls short of expectations, product updates and iterations fall short of expectations, increased competition, etc.