Event: The company publishes its report for the third quarter of 2024. In 2024, Q3 achieved operating income of 73.58 billion yuan, +27.1% year on year; net profit to mother of 3.68 billion yuan, +21.9% year on year, after deducting non-net profit of 3.16 billion yuan, +9.7% year on year; gross profit margin of 11.7%, year-on-year. ; Net interest rate 5.5%, YoY -0.7p.p.

Third-quarter results are in line with expectations, and full-year revenue and profit growth can be expected. Benefiting from the growing boom in the consumer electronics industry, compounded by endogenous growth and epitaxial mergers and acquisitions in various sectors of the company, the company's Q3 revenue was +27.1% year-on-year, and net profit to mother was +21.9% year-on-year, in line with expectations. The company is optimistic about its annual performance and issued an annual performance forecast for the year 24. It is estimated that net profit due to mother for the full year of '24 will reach 13.14 billion yuan to 13.69 billion yuan, +20% -25% year-on-year, and 11.49 billion yuan to -12.71 billion yuan after deducting non-net profit, or +12.8% -24.8% year-on-year.

By business, 1) Consumer electronics business sector: The consumer electronics market continues to recover, catalyzed by AI models.

According to IDC data, global smartphone shipments rose 4% year over year in Q3 2024, achieving five consecutive quarters of growth in shipments. Apple, the company's core customer, performed well in Q3, with a year-on-year increase of 3.5%.

We expect that Apple will release the latest iOS system equipped with Apple Intelligence features or catalyze switch consumption within the year. At the same time, cooperation between the company and Apple continues to deepen in various areas such as components, modules, and complete machine assembly. We believe that Apple's end-side AI products are expected to drive the company's performance to continue to grow. 2) Automobile business segment: The company has now formed a diversified product matrix such as automobile wiring harnesses, connectors, smart cockpits, and intelligent driving, and continues to expand its domestic and overseas production capacity layout business. On September 14, the company announced that it plans to acquire 50.1% of the shares of Leoni AG (corresponding WSD business-related entity) and 100% of the shares of Leoni AG's wholly-owned subsidiary Leoni Kabel GmbH (corresponding ACS business-related entity) through an equity transaction.

Through this acquisition, the company hopes to accelerate the globalization process of the automotive business and enhance the company's overall competitiveness in the global market. 3) Communications business sector: The company continues to cultivate products such as electrical connectivity, optical connectivity, air cooling/liquid cooling, power management, radio frequency, etc., and has reached in-depth cooperation with leading chip manufacturers. It has formulated next-generation high-speed connection standards such as 800G and 1.6T for mainstream data centers and cloud service providers around the world.

Investment advice: We expect the company's revenue for 2024-2026 to be 259.73/295.04/337.78 billion yuan, respectively, and net profit to mother of 13.96/16.96/21.21 billion yuan, respectively. We are optimistic that revenue and profits from the company's future business expansion will continue to increase, and maintain a “buy” rating.

Risk warning: Downstream demand falls short of expectations, client-side AI development falls short of expectations, macroeconomic growth falls short of expectations, and changes in the external economic situation.