2024Q3's performance was high, and downstream market recovery brought performance growth, maintaining the “buy” rating of 2024Q1-Q3, the company achieved revenue of 2.473 billion yuan, +58.12% year over year; achieved net profit of 0.289 billion yuan, +145.47% year over year; achieved net profit deducted from non-mother 0.236 billion yuan, +351.55% year over year; achieved gross profit margin of 33.76%, -1.08pcts year on year; 2024Q3 achieved revenue of 0.942 in a single quarter billion yuan, +44.01% YoY, +7.23% month-on-month; realized net profit of 0.141 billion yuan, +106.45% YoY, +17.85% month-on-month; realized net profit of 0.124 billion yuan, +165.86% YoY, +20.19% month-on-month; achieved gross profit ratio of 34.69%, +0.22pcts YoY and +1.30pcts month-on-month. The recovery slope of the downstream market falls short of expectations. We slightly lowered our 2024-2026 net profit forecast to 0.403/0.576/0.805 billion yuan (previous value was 0.407/0.691/0.891 billion yuan), and the current stock price corresponding PE is 70.7/49.5/35.5 times. We are optimistic about the sufficient growth brought about by the company's new product launch, and maintain a “buy” rating.

Continued growth in downstream demand brings revenue growth. Cost-side improvement and profitability increase 2024Q1-3 The company benefited from continued growth in demand in the downstream smart wearable and smart home market. The company's revenue increased year-on-year, with the third quarter recording a new high quarterly revenue; benefiting from changes in the company's product structure and falling upstream costs, the company's gross margin improved quarterly and profitability increased; at the same time, benefiting from the scale effect brought about by the year-on-year increase in the company's revenue. The cost ratio decreased during the period, and the 2024Q1-3 company's performance increased year-on-year.

Looking at the incremental performance and downstream demand brought about by the continued recovery of downstream demand and the release of new products, according to IDC data, 2024Q1 global wearable shipments were 0.11 billion units, +8.8% year on year, China's wearable device shipments were 0.034 billion units, +36.2% year on year, and domestic smartwatch market shipments were 9.1 million units, +54.1% year on year. Among them, adult smartwatch units were 5.05 million units, +62.8% year on year, and domestic bracelet market shipments were 3.7 Million units, +29.6% year over year; according to Canalys forecast, global smartwatch shipments are expected to increase 17% year over year in 2024. From the perspective of the company's products, 2024H1 has mass-produced and shipped the BES2800 next-generation smart wearable chip. It has now been introduced in the headsets, smartwatches, smart glasses and other projects of many customers, and is expected to continue to grow in the future. We are optimistic about the company's competitiveness in the field of wearable chips, and with the gradual mass production of products, it will help the company continue to increase its market share and have sufficient growth momentum.

Risk warning: downstream demand falls short of expectations; customer introduction falls short of expectations; technology research and development falls short of expectations.