Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, revenue was 1.366 billion yuan, +36.49% year-on-year, net profit to mother was -0.408 billion yuan, and net profit after deducting non-net profit was -0.441 billion yuan. Looking at the single quarter, 24Q3 achieved revenue of 0.517 billion yuan, +86.59% YoY, +6.32% month-on-month, net profit to mother of -0.142 billion yuan, minus non-net profit of -0.155 billion yuan, Q3 gross margin of 32.06%, -4.39pct year-on-year, and -3.27pct month-on-month.

Downstream demand is gradually improving, and automotive electronics products continue to be released. 24Q3's revenue continues to grow sequentially. Judging from the downstream boom, demand in the automotive electronics market continues to grow; the industrial market has gradually emerged from inventory removal, and industry demand is gradually recovering; demand in the optical storage market is still low, with demand in emerging markets such as Asia, Africa, and Latin America recovering; and the consumer electronics market as a whole has returned to normal demand.

Affected by the overall macroeconomy and increased market competition, the sales price of the company's products is under pressure. The company's comprehensive gross margin for the first three quarters of 2024 was 33.21%, and the gross margin for the 24Q3 single quarter was 32.06%, -4.39pct year-on-year, and -3.27pct month-on-month.

The McGowan acquisition was carried out in an orderly manner. After the supplementary agreement transaction is completed, the company will directly and indirectly hold 100% of McGowan's shares. At present, the company has paid the second transfer price for this acquisition to 28 natural persons including Shanghai Silicon Technology Co., Ltd. and Fang Jun. As of the disclosure date of the company's 2024 three-quarter report announcement, Shanghai McGone Microelectronics Co., Ltd. has completed changes in the shareholder register, and the company has obtained 62.68% of McGowan's shares directly held by its counterparty, Silicon Technology. The company recently announced a supplementary agreement to acquire 100% of McGowan's shares. After the transaction is completed, the company will fully control McGowan's operations and decisions, which is conducive to improving the efficiency of the company's overall business integration with McGowan, concentrating R&D resources, and achieving optimal allocation of resources.

The acquisition of McGowan will collaborate with the company's original business, help enrich the company's magnetic sensor product categories such as magnetic coding and magnetic switches, and complement the company's existing magnetic sensor products.

Profit forecast: The company's revenue for 24-26 is 1.883, 2.54, and 3.249 billion yuan, respectively, and net profit to mother is -0.311, 0.02, and 0.242 billion yuan, maintaining a “buy” rating.

Risk warning: market competition intensifies; downstream demand recovery falls short of expectations; new product development falls short of expectations