Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 3.194 billion yuan, +21.76%; realized net profit to mother of 0.475 billion yuan, +18.99% year-on-year; realized deducted non-net profit of 0.455 billion yuan, or +18.01% year-on-year. Among them, in Q3 2024, the company achieved revenue of 1.563 billion yuan, +28.15% YoY, +82.32%; realized net profit to mother 0.321 billion yuan, +8.53% YoY, +438.09% month-on-month; realized deducted non-net profit of 0.321 billion yuan, +2.06% YoY and +619.96% month-on-month.

The consumer electronics business continued to expand, and performance achieved steady growth: In the first three quarters of 2024, the company continued to receive orders for front-end modules such as cameras, and the business for terminal products such as headsets and mobile phones also increased year-on-year, leading to steady revenue growth. In terms of profitability, in the first three quarters of 24, the company's gross margin was 44.69%, -0.12pcts year on year; net margin was 15.22%, -0.02pcts year on year, and profitability remained relatively stable. In terms of expenses, in the first three quarters of 24, the company's sales, management, R&D, and financial expense ratios were 10.04%/7.71%/8.55%/0.57%, respectively. The year-on-year changes were -0.38/-0.75/-0.05/+1.79pcts, respectively. The main reason for the increase in financial expenses was due to exchange fluctuations.

The localization process of semiconductor equipment is accelerating, and inspection and measurement equipment is building a second growth curve: Driven by demand and the wave of domestic substitution, the semiconductor equipment industry has ushered in great opportunities for development, and the localization process of semiconductor equipment will continue to advance. With the rise of the wave of artificial intelligence, demand for semiconductors used in computing power and storage rapidly exploded, and demand for high-end semiconductor devices in segments such as GPUs and HBM also increased dramatically, becoming an important growth point for intelligent equipment in the semiconductor field. Against the backdrop of the wave of localization of semiconductor equipment and the rapid development of artificial intelligence chips, the market segment in which the company's semiconductor equipment business is located has also maintained a high level of prosperity. Since the acquisition of Japan's OPTIMA, the company has efficiently completed technology integration, continued to expand equipment product lines and applications in emerging fields such as HBM in the field of high-end semiconductors, and is focusing on increasing the value of individual devices. Through the “global technology+Chinese market” strategy, the company's wafer inspection and measurement equipment is rapidly opening up domestic market space, speeding up the introduction of advanced technology verified by leading customers in the industry into domestic semiconductor manufacturers, and helping the share of domestic wafer inspection equipment continue to increase.

In the field of wafer inspection and measurement equipment, the company has become a supplier of wafer inspection and measurement equipment for well-known domestic and foreign wafer manufacturers such as Sumco, Samsung, GCL, Yiswei, and Zhonghuan Semiconductor.

AI is driving the increase in demand for iterative devices, and the upward trend in the consumer electronics industry confirms that since 2023, the application of AI technology in consumer electronics terminal devices has accelerated, driving the transformation of the industry from weak recovery to growth. According to IDC's definition, a terminal device with an AI processing chip is called an AI terminal.

In 2024, end-side AI technology will accelerate implementation in mobile phones, PCs, XR, wearable devices, and Internet of Things (IoT) terminal devices, and AI terminals ushered in the first year of development. Consumer electronics terminal products will continue to iterate in terms of software, hardware, product forms and versions, and new technologies and applications will bring about the need to repurchase upgraded devices. IDC predicts that with the gradual recovery of consumer demand, the smartphone market is expected to achieve positive growth in 2024, showing broader market prospects; by 2025, global smartphone shipments are expected to reach 1.519 billion units. The consumer electronics sector is the company's core business area. The company is deeply tied to its core customers. The company's intelligent manufacturing equipment basically covers terminal products such as mobile phones, tablets, headphones, watches, and audio. Looking ahead, growing consumer electronics demand will continue to provide sufficient momentum for the company's performance.

Raise profit forecasts and maintain “gain” ratings: Based on the iterative development of consumer electronics manufacturing technology and the popularity of mobile internet applications, the global mobile device market, represented by smartphones, tablets, and laptops, is growing rapidly, and the consumer base continues to expand. The company is a leading domestic consumer electronics equipment company. In the future, the company is expected to continue to benefit from the continued recovery in demand in the consumer electronics sector and the acceleration of the domestic semiconductor equipment replacement process, further opening up room for performance growth. Considering that AI is driving increasing demand for equipment iteration, inspection/measurement equipment quickly opens up domestic market space, and combines the company's performance in the first three quarters of 24, the profit forecast was raised. The company's net profit for 2024-2026 is estimated to be 0.828 billion yuan, 0.975 billion yuan, and 1.099 billion yuan respectively, EPS was 4.13 yuan, 4.87 yuan, and 5.49 yuan, respectively, and PE was 19X, 16X, and 14X, respectively.

Risk warning: Reliance on the core customer industry chain is highly risky; industry recovery falls short of expectations; industry competition increases risks; product development falls short of expectations.