Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 3.333 billion yuan, +51.16%; realized net profit to mother of 0.459 billion yuan, +85.36% year over year; realized deducted non-net profit of 0.444 billion yuan, or +87.83% year over year. In 2024, Q3 Company achieved revenue of 1.189 billion yuan, +41.50% YoY, +7.66%; realized net profit to mother 0.151 billion yuan, +23.53% YoY, +3.60% month-on-month; realized deducted non-net profit of 0.149 billion yuan, +24.92% YoY and +3.01% YoY.

24Q3 results increased month-on-month, and profitability improved in the first three quarters: the company's revenue grew rapidly in 2024. We believe it was mainly due to customer releases of new products and the year-on-year increase in consumer electronics and automotive electronics business shipments. The year-on-year growth rate of net profit to mother in 24Q3 was lower than the revenue growth rate. We believe it was mainly due to factors such as depreciation of the 5G industrial park project under construction and a decrease in investment income. The company's gross margin for the first three quarters of 2024 was 33.76%, +0.91pct year on year; the company's net margin was 14.24%, +2.53 pct year on year.

24Q3's gross margin was 33.60%, -1.48pct year on year, +1.11pct month-on-month; net margin was 13.10%, -2.52 pct year on year, -0.76pct month-on-month. In terms of expenses, the 24Q3 company's sales, management, R&D and financial expenses rates were 2.87%/7.03%/8.61%/0.14%, respectively, and +0.29/ -0.41/-1.91/+0.08pct, respectively. The overall cost rate was well controlled.

Production and sales are booming in the NEV industry, and the company's automobile business is expected to rise sharply in volume and price: in the first three quarters of 2024, the overall production and sales situation in the domestic automobile industry was stable. Among them, NEV production and sales continued to grow rapidly, the market size continued to grow rapidly, and the market share increased steadily. According to data released by the China Automobile Association, domestic production and sales of new energy vehicles from January to September 2024 reached 8.316 million units and 8.32 million units, respectively, up 31.7% and 32.5% year-on-year, respectively, and the market penetration rate reached 38.6%. The company has a complete range of automotive connector products. The main types of products are RF Fakra board end & line end, HDcamera connector, high speed Ethernet connector, HSD board end & wire end, vehicle USB, etc., and has been successfully introduced by many leading domestic automobile customers. It has entered the supply chain of major domestic automobile manufacturers such as Geely, Great Wall, BYD, Changan, Chery, and Ideal, and has achieved large-scale shipments. On the one hand, we are optimistic that the automotive industry will continue to thrive, and the company is expected to continue to benefit from increased sales from core customers. On the other hand, as the penetration rate of new energy vehicles and the penetration rate of intelligent driving continue to increase, the number and value of connectors used in bicycles is also showing an upward trend, and the company's automotive connector business is expected to rise sharply. Furthermore, as the scale effect of the company's automotive connector business becomes apparent, the profit level of the automotive connector business will remain relatively stable due to favorable factors such as further optimization of process processes and strengthened cost control.

Consumer electronics continues to recover, and the release of new terminals is expected to drive the consumer electronics business to continue to grow: from the perspective of consumer electronics customers, the company has entered the global mainstream smartphone brand supply chain and has become the core supplier of world-renowned smartphone companies such as Xiaomi, OPPO, Vivo, Samsung, Honor, ZTE, and Huawei. According to IDC data, domestic smartphone shipments in 24Q3 amounted to 68.78 million units, +3.2% year-on-year, maintaining year-on-year growth for four consecutive quarters. Thanks to the impressive market performance of manufacturers such as Vivo, Huawei, and Xiaomi, the overall Android market was boosted by +3.8% compared to the same period last year. Shipments from domestic mobile phone brands continue to grow, and the industry boom continues to recover. As the company's main supplier of Android mobile phone terminals, especially Chinese mobile phone terminal customers, the consumer electronics business is expected to grow steadily. The company's consumer electronics terminal includes products related to miniature electrical connectors and interconnection systems, and BTB, mainly RF BTB. Looking ahead to Q4, many mobile phone brands are intensively releasing new products. We are optimistic that the company's consumer electronics business will grow month-on-month.

Maintaining the “gain” rating: The company's automotive connector products have been successfully introduced into the supply chains of major domestic automobile manufacturers such as Geely, Great Wall, BYD, Changan, Chery, and Ideal. On the one hand, the company's share is expected to grow further; on the other hand, as the penetration rate of new energy vehicles and intelligent driving penetration rates continue to increase, bicycle usage and value are also on the rise, and the company's automotive connector business is expected to rise rapidly in volume and price. In terms of consumer electronics, industry demand continues to recover, and domestic mobile phone manufacturers such as vivo, Huawei, and Xiaomi have performed strongly in the market. As the main supplier of domestic Android mobile phone brands, the company's consumer electronics is expected to grow steadily, benefiting from increased customer mobile phone shipments. The company's net profit for 2024-2026 is estimated to be 0.625 billion yuan, 0.868 billion yuan, and 1.017 billion yuan respectively; EPS is 1.47, 2.05, and 2.40 yuan/share, respectively; PE for 24-26 is 38X, 27X, and 23X, respectively.

Risk warning: Consumer electronics demand falls short of expectations, automobile customer sales fall short of expectations, market competition heightens risks, and the penetration rate of intelligent driving falls short of expectations.