Investment summary

Incident Overview

On October 26, the company released its report for the third quarter of 2024. In 2024Q1-3, the company achieved operating income of 53.161 billion yuan, yoy +19.70%, of which 2024Q3 achieved operating income of 19.571 billion yuan and yoy +28.71%; realized net profit of 0.415 billion yuan to mother, of which 2024Q3 achieved net profit of 0.274 billion yuan, an increase of 0.277 billion yuan over the previous month, turning a loss into a profit.

Analysis and judgment

Continued development is driven by electrification & AI, and the semiconductor business supports steady improvement in performance. Driven by the automotive and industrial power sector and the recovery in the consumer electronics sector, the semiconductor business of 2024Q3 achieved operating income of 3.832 billion yuan, a year-on-month increase of 5.86%; in 2024Q3, net profit of 0.666 billion yuan, QOQ +18.92%. Wingtai Technology accelerates vertical integration in the semiconductor component field, continues to strengthen its supply capacity, build a safe and controlled supply system, and continues to increase investment in R&D to cultivate independent innovation capabilities and core competitiveness. With the continuous development of electrification and AI driving, the company's main products are also constantly rising. According to the company's statement, the company's bicycle chip usage can currently reach up to about 1,000 units/vehicle among existing electric vehicle customers; and with the booming development of the AI industry, computing power demand is driving the rapid development of AI servers, and demand continues to be strong; the company's forward-looking layout, MOS products supporting AI servers are about 10 US dollars/unit, which is much higher than 1 US dollar/unit for ordinary non-AI servers. Driven by terminal applications, the company's semiconductor business gradually recovered in 2024Q3, with a gross margin of 40.5%, an increase of 2.8 percentage points over the previous year. We believe that the company's insistence on building and improving the core competitiveness of complete machine products and developing high ASP products in response to new market demand is expected to strengthen its position in the global power semiconductor industry chain, and the semiconductor business line is expected to continue to improve.

The results of improving quality and efficiency have been shown, and there are many highlights in the product integration business. The 2024H1 product integration business is under pressure due to factors such as lower prices for new projects, increased prices for some raw materials, and rising labor costs in factories. Entering the third quarter, the company focused on strengthening internal management, controlling fees and increasing efficiency, leading to a year-on-year decline in the 2024Q1-3 cost ratio; the company grasped market incremental opportunities and accelerated the connection of high-ASP products. Some new projects have begun mass production and shipment, driving significant revenue growth. The 2024Q3 product integration business achieved revenue of 15.73 billion yuan, yoy +45.58%; on the basis of increased revenue and fee control, the company actively optimized upstream and downstream collaboration in the supply chain, improved costs through commercial terms and new suppliers, and continuously increased the comprehensive gross profit margin of the product. The gross margin of the 2024Q3 product integration business gradually recovered to 3.8%. We believe that in the current context of the continuous recovery of the consumer electronics sector, the product integration business is expected to maintain a quarterly improvement trend with the optimization and adjustment of the company's internal cost structure and the gradual implementation of new businesses.

Investment advice

Maintain a “buy” rating. We adjusted the company's 2024-2026 net profit forecast to 0.818/2.01/3.162 billion yuan. The corresponding EPS was 0.66/1.62/2.54 yuan, respectively, and the corresponding PE valuation was 66/27/17 times, respectively.

Risk warning

The recovery in terminal demand fell short of expectations, order delivery fell short of expectations, and industry competition intensified