Shengbang Co., Ltd. released its three-quarter report, achieving revenue of 0.868 billion yuan (yoy +18.52%, qoq +2.48%) and net profit of 0.1 billion yuan (yoy +102.74%, qoq -14.50%) in Q3 2024. Q1-Q3 2024 achieved revenue of 2.445 billion yuan (yoy +29.96%) and net profit of 0.3 billion yuan (yoy +100.57%) to mother. The consumer electronics market continues to recover, and pan-industrial customers are undergoing a gentle inventory reconstruction phase. The company, as the leading domestic analog device core, is benefiting from continued recovery in demand; 2) The company's platformization effect is prominent, and the launch of new material models has accelerated. By the end of '23, it could sell more than 5,200 products, covering 32 categories, and the customer penetration rate continued to increase. We look forward to continued growth in the company's performance in 2025/26, maintaining the buy rating.

3Q24's performance increased significantly year-on-year, and the impact of expenses on net profit fell month-on-month. 3Q24 achieved revenue of 0.87 billion yuan, yoy +18.5%, and qoq +2.5%, achieving gross profit margins of 51.88%, yoy-+2.9pct, and qoq-0.3pct. As a platform-based company, the company has many components. The downstream is relatively scattered. The consumer and pan-industrial markets each account for half. The downstream market continues to recover, and the company's revenue is growing steadily.

The 3Q24 company achieved net profit of 0.104 billion yuan, yoy +103%, and qoq -14.5%. The month-on-month decline in net profit to mother was mainly due to a slight decline in 3Q gross margin and a slight increase in expenses during the period. 3Q24's R&D expenses were 0.23 billion yuan, and the R&D rate was 26.6%, +1.9pct compared to the previous month.

Outlook: The boom in the simulation industry continues to pick up, and the company's platform-based layout results are remarkable. Global simulation leader Texas Instruments shows that industrial customers are still digesting inventory in the third quarter, and most segments have bottomed out; China's NEV business increased 20% month-on-month, but demand for automobiles in markets other than China is weak; the third quarter is the traditional peak season for consumer electronics, with strong demand for PCs, mobile phones, etc.; communication business demand continues to pick up. As the leading core of domestic analog devices, the company benefits from continued recovery in demand; on the price side, we see that competitive pressure is slowing down compared to last year, while the company's high-value products gradually contribute revenue; the company continues to expand new products and new customers. In 2023, the company launched more than 900 new products. By the end of '23, it could sell more than 5,200 products, covering 32 categories. The new material models began to contribute revenue, and the customer penetration rate continued to increase.

Profit forecast and valuation: maintain a “buy” rating, target price of 112.23 yuan

Considering the improvement in economic climate, we raised the company's 24-26 revenue forecast to 3.3/4.08/5.07 billion yuan (previous value: 3.25/4.02/5 billion yuan). The company's R&D efforts were strengthened, and we adjusted the R&D expense ratio forecast. The corresponding net profit to the mother was 0.41/0.61/0.91 billion yuan (previous value: 0.46/0.64/0.91 billion yuan). Maintaining “buying”, considering the gradual return of the company's net interest rate and market recovery, 87 times the 25-year PE (the median valuation since the company went public is 92.2 times PE), and the target price was raised to 112.23 yuan (previous value: 98.6 yuan).

Risk warning: In the global semiconductor downturn cycle, demand for semiconductor equipment falls short of expectations, and industry competition intensifies.