Incident: The company issued the “Notice on the Forecast of Daily Related Transactions in 2025”. In 2025, it is expected to purchase raw materials of 0.561 billion yuan from related parties and sell products and goods to related parties for 3.401 billion yuan.

The budget for related transactions shows that the related boom is expected to recover. 1) In terms of procurement of raw materials from related parties, the estimated amount of raw materials purchased from affiliated companies in the aviation industry is 0.161 billion yuan in 2025, which is 1.58 times the actual amount generated from January to November 2024; the estimated amount of raw materials purchased from Xinghang Optoelectronics is 0.4 billion yuan, which is 1.26 times the actual amount generated from January to November 2024. 2) In terms of sales of products and commodities to related parties, sales of products and commodities to affiliated companies in the aviation industry are estimated at 3.4 billion yuan in 2025, which is 1.13 times the actual amount generated from January to November 2024; sales of products and products to Xinghang Optoelectronics are estimated to be 1.4 million yuan, which is 0.63 times the actual amount generated from January to November 2024. 3) It is estimated that the amount of labor received from aviation industry subsidiaries in 2025 is 17 million yuan, which is 1.17 times the actual amount accrued from January to November 2024; the amount of labor provided to subordinate units in the aviation industry is 38 million yuan, which is 1.86 times the actual amount generated from January to November 2024. 2025 is the final year of the “14th Five-Year Plan”, and the related demand boom is expected to recover, driving the company's business situation to improve.

The decline in third-quarter results narrowed, and full-year business performance will grow. The company's 2024 three-quarter report achieved operating income of 14.095 billion yuan, a year-on-year decrease of 8.23%; realized net profit to mother of 2.513 billion yuan, a year-on-year decrease of 13.15%. Among them, the third quarter achieved operating income of 4.898 billion yuan, an increase of 6.45% year on year; realized net profit of 0.845 billion yuan, down 10.14% year on year. The decline was narrower than in the first half of the year. According to the company's October 31 investor survey minutes, the company's overall orders have shown a recovery trend at this stage, and demand in some major business areas has sent a positive signal. In the fourth quarter, the company will anchor goals, work hard, continue to strengthen resource allocation capabilities, strengthen the level of rapid response, and fully cope with the delivery pressure brought about by increased demand. It is expected that business performance will grow throughout the year.

Production capacity construction is progressing in an orderly manner to promote the development of capitalized colleges and universities. 1) By the end of the third quarter, the company's South China Industrial Base Project and Luoyang Infrastructure Device Industrial Park Project had been completed and put into operation. The high-end interconnection technology industry community project and the civil aircraft and industrial interconnection industrial park project have completed the main capping. The subsidiary Taixing Optoelectronics liquid cooling industrial base project was successfully completed and put into operation, and the Shenyang Xinghua aero engine wiring harness and small fan capacity improvement project has completed the main structure inspection. The company's vigorous industrialization projects will provide strong support for the high-quality achievement of medium- to long-term strategic goals. 2) On October 29, the company announced that it intends to develop strategic cooperation with Luoyang Yanglian Fund. The Luoyang Sunshine Federation Fund mainly expands vertically and horizontally around the development direction of the optoelectronics industry chain in Luoyang City to explore investment opportunities. As a leading enterprise in the domestic connector industry, the company has strong industrial advantages and can provide good industrial collaboration for Luoyang Yangliang Union Fund's investment targets.

Investment advice: We expect the company's revenue for 2024-2026 to be 21.381 billion yuan, 26.388 billion yuan, 31.621 billion yuan, and net profit to mother of 3.532 billion yuan, 4.313 billion yuan, and 5.211 billion yuan, respectively. The corresponding EPS is 1.67 yuan, 2.03 yuan, and 2.46 yuan, respectively, and the corresponding PE is 21.8X, 17.9X, and 14.8X, respectively. As a leading domestic special connector, the company continues to consolidate its position as the preferred supplier, focus on new industries and future industries, and implement in-depth reform and deepening improvement actions. Performance is expected to continue to grow, and for the first time coverage was given a “buy” rating.

Risk warning: military orders fall short of expectations; civilian product business development falls short of expectations; risk of not updating information in a timely manner using research reports; performance forecasts and valuation judgments fall short of expectations.