Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 0.592 billion yuan, +60.91% year over year; realized net profit to mother of 0.052 billion yuan, +124.30% year over year; realized deducted non-net profit of 0.053 billion yuan, +171.73% year over year. In 2024, Q3 Company achieved revenue of 0.227 billion yuan, +41.89% YoY, -3.85%; realized net profit to mother 0.011 billion yuan, -18.18% YoY, -60.33% YoY; realized deducted non-net profit of 0.012 billion yuan, +16.41% YoY and -55.90% YoY.

24Q3 revenue grew at a high year-on-year rate, and expenses dragged down the Q3 profit side: The company's revenue increased sharply in the first three quarters of 2024, mainly due to increased orders for MIM products and other metalworking and plastic products. 24Q3's revenue declined slightly month-on-month, mainly due to a slowdown in the pace of sales of product lines such as tablets and capacitive pens, a decline in demand, and a month-on-month decline in demand for superimposed folding screen hinges. The company's gross margin for the first three quarters of 2024 was 40.51%, +5.53pct year on year; the company's net margin was 11.46%, +5.49pct year on year.

The 24Q3 gross margin of the company was 39.87%, +1.56pct year over year, and -1.32pct month-on-month. The month-on-month decline was mainly due to the company's active new business and the related business was still penetrating the entire process, and profitability had not yet been fully released; the net interest rate was 7.64%, -2.19pct year over year, and -7.35pct month-on-month. The month-on-month decline was mainly due to exchange losses and a month-on-month increase in share payment fees. In terms of expenses, the company's sales, management, R&D and financial expenses for the first three quarters of 2024 were 1.19%/9.58%/12.52%/0.73%, respectively, -0.52/-0.32/-3.39/+2.35pct, respectively. The overall cost rate was well controlled.

The value of folding machine hinges has increased, and the company is actively expanding the folding screen hinge business: according to IDC data, 24Q3 shipped 39.6 million tablets globally, +20.4% compared to the same period. Manufacturers released new products+AI innovations to drive the switching cycle, and the industry's supply side actively prepared stocks. In terms of folding machines, IDC data shows that in 24Q3, China's folding screen phone shipments reached 2.23 million units, +13.6%. The market penetration rate in the first three quarters of 2024 was 3.2%, and the folding screen phone market still has a lot of room for growth in China. In addition, Huawei launched the world's first new three-folding machine, which uses an internal folding+outward folding double hinge system to achieve the whole machine's fiber? thin. As a key structure connecting two or more parts of a folding screen phone, a hinge is one of the main value additions to a folding screen phone. As the main process for hinges, the core component of folding screens, the demand for MIM also continues to rise. In addition to maintaining good cooperative relationships with existing folding screen customers, the company also maintains business contacts with excellent folding machine brand end customers at home and abroad, and actively expands more business opportunities related to folding screen hinges on the basis that production capacity can support customer needs. In terms of production capacity, the production capacity of the company's MIM precision structural parts is mainly located in Pingshan, Shenzhen. The company has already been put into operation in a small part. The company will speed up the commissioning process and continue to take on the capacity overflow from other factories to provide strong support for seeking more business opportunities. It is expected to reach the scheduled state of use by the end of 2025.

The non-MIM business has built a second growth curve and is expected to launch new production capacity in Vietnam: the company's non-MIM business includes laser processing, CNC, wire cutting, precision injection molding, etc. The R&D and manufacturing capabilities of precision manufacturing processes such as laser processing, wire cutting, and CNC have been recognized by first-class customers at home and abroad. The company has formed a two-wheel drive development model for MIM precision parts and non-MIM precision parts. In addition, the company also continues to lay out businesses in the non-consumer electronics sector, such as medical devices and automotive electronics. In terms of production capacity, the company's production capacity for non-MIM precision structural parts is mainly located in Huiyang. In the first half of this year, in order to meet the growing business needs of overseas customers, the company laid out new non-MIM production capacity in Vietnam through asset mergers and acquisitions. As of November '24, it is undergoing procedures related to property rights changes and environmental protection and fire protection permits.

Maintaining the “gain” rating: We are optimistic that the company's MIM business will fully benefit from the continued growth in demand for folding screen phones. The company is actively deploying emerging technologies such as artificial intelligence, folding screen phones, and 3D printing, and the MIM business is expected to continue to grow. Furthermore, the company is actively expanding non-consumer electronics markets such as automotive electronics and medical devices, and is expected to contribute additional volume in the future. The company's net profit for 2024-2026 is estimated to be 0.087 billion yuan, 0.135 billion yuan, and 0.22 billion yuan, respectively, and EPS is 0.54 yuan, 0.84 yuan, and 1.37 yuan, respectively, and the corresponding PE is 38X, 24X, and 15X, respectively.

Risk warning: Risk of macro-environmental fluctuations, customer orders falling short of expectations, production capacity release falling short of expectations, and intensifying industry competition.