Key points of investment
Company announcement: The company announced the results for the third quarter of 2024. The results are in the performance forecast and are in line with expectations. In 2024, Q3 achieved operating income of 2.65 billion yuan, +37%/+20%; 24Q3 achieved net profit of 0.178 billion yuan to mother, +53%/+23% year-on-month, net profit of 0.174 billion yuan after deducting non-return to mother net profit of 0.174 billion yuan, +57%/+25% year-on-month.
Core customers have increased production and sales, and the main business continues to grow. Client: 24Q3 The company's core customers Chery, Changan, Geely, Great Wall, Cylis/ Ideal output was +13%/-17%/+14%/+1%/+17%/62% month-on-month, respectively, and the core customer's new car entered the volume cycle. At the same time, the company's automotive electronics products are expanding horizontally, and customer development is progressing smoothly. According to the company's 2024 semi-annual report, the company's automotive electronics business grew significantly in the first half of 2024. Core products such as cockpit domain control, HUD, screen displays, wireless charging, and in-vehicle entertainment systems won a large number of orders, and the customer base expanded dramatically. In terms of international cooperation, we have successfully established new project cooperation with car companies such as SAIC Audi, Stellantis Group, Changan Mazda, Changan Ford, Beijing Hyundai, and Daimler.
Costs were reduced and efficiency increased, and net interest rates increased year-on-month. 24Q3's gross profit margin was 21.06%, -0.82pct year on year, and -0.88pct month-on-month. The month-on-month decline was mainly due to changes in product structure, and the gross margin of the company's core automotive electronics business was lower than overall. The cost rate during the 24Q3 period was 12.7%, -1.9pct/-1.2pct compared to the same period. Benefiting from the scale effect, sales/management/R&D expenses were all in a declining channel. The 24Q3 net profit margin of the company was 6.7%, +0.7pct/+0.2pct YoY.
The intelligent driving business has accelerated and entered the first tier of domain controllers. In 2024, the Beijing Auto Show Company debuted the “Qualcomm Snapdragon 8255 Domain Control Solution”. The company launched a high-performance integrated domain control product for driving and parking, which can achieve L2+ level intelligent driving functions, including high-speed NOA, urban NOA and memory parking, and supports OTA upgrades. The company expects 2024H2 to launch integrated domain control for cabin driving based on Qualcomm 8775, and competitiveness is expected to be further enhanced.
Profit forecast and investment rating: As the pace of release of the company's orders exceeded expectations and the performance increased quarterly, we raised the company's 2024-2026 revenue forecast to 9.8/12.17/14.39 billion yuan (originally 9.03/11.23/13.28 billion yuan), +37%/+24%/+18% year-on-year, respectively; the net profit forecast for 2024-2026 was 0.67/0.9/1.13 billion yuan (originally 0.0.89/1.12) billion yuan), +45%/+33%/+26% year over year, corresponding PE was 24/18/14 times, respectively, maintaining the “buy” rating.
Risk warning: Overseas market expansion fell short of expectations; the recovery in downstream passenger car demand fell short of expectations, and the passenger car price war exceeded expectations.