Incident: The company released its 2024 three-quarter report, and achieved revenue of 4.7 billion yuan in the first three quarters of 2024, +23.1% year-on-year, and net profit to mother 0.097 billion yuan, +95.5% year-on-year. Among them, 24Q3 achieved revenue of 1.63 billion yuan, +29.2% year-on-year, and net profit to mother of 0.015 billion yuan, or -57.1% year-on-year.

Q3 Gross margin improved month-on-month, but overseas assets are still being suppressed by foreign exchange. Q3 revenue was 1.63 billion yuan, or +29.2% year-on-year. The department still achieved good growth in the volume of major new energy customer projects. The 24Q3 gross profit margin was 14.52%, +0.58pct. The month-on-month increase in profitability is expected to benefit from: 1) the decline in raw material prices; 2) the volume of structural components for major new energy customers is gradually improving. However, 24Q3's financial expenses further increased to 0.049 billion yuan month-on-month, mainly due to fluctuations in the Mexican peso exchange rate in the third quarter. As a result, the new Mexican plant (San Miguel plant) held loans and accounts payable in euros and dollars for early plant construction and purchase equipment and operations, resulting in large unrealized exchange losses. The 24Q3 net interest rate was 0.94%, -0.3 pct month-on-month, putting pressure on profits in the short term.

The inflection point of profit has been reached, and major customers such as Quanjie and NIO are driving the division's profits to gradually enter the repair cycle. Core customers have continued to gain strength since 24Q2:1) Weilai Q2 delivered 0.057 million new vehicles, +1.4 times the previous year, and +90.9% month-on-month. 2) Questionnaire M9 Q2 delivered 0.0465 million vehicles (Q1 was 0.0062 million units). We determine that core customers+new projects will drive a recovery in the production capacity utilization rate of the company headquarters and optimization of the product structure. It is expected that the profitability of the division will recover in the future, driving the company's performance into the repair cycle.

An independent leader in aluminum body parts, leading the new trend of integrated die-casting, the leading company is expected to be the first to enter a positive cycle in '24. New energy has spawned a revolution in the integrated die-casting process. It is a potential 100 billion market from 0 to 1. Integrated die casting is the optimal cost and efficiency solution for vehicle body weight reduction. Therefore, an industry consensus has been formed under Tesla's pioneering promotion. Currently, the automotive industry is revolutionizing the integrated die-casting process. According to Tesla's plan, the scope of integrated vehicle body applications will penetrate from the rear seat plate to the front body and chassis battery tray. The value of the bike can be estimated at at least 8,000 yuan, and the market prospects are broad. Integrated die castings are larger and more integrated aluminum body parts. Currently, the company has more than 10 years of experience in aluminum casting body parts (R&D began in 2011), and has accumulated rich experience in equipment customization and development, material research and development, mold design, process design and application. Years of experience in mass production of luxury models have also accumulated process advantages with high gold content for the company, forming a clear pioneering advantage. Currently, integrated die casting has the most orders in hand. Integrated die casting is expected to enter the inflection point of accelerated industrialization in 24 years (multiple brands and models) (Put into production), I am optimistic about the opportunity for leading companies to take the lead in entering the order-profit-expansion cycle to accelerate.

Profit forecast: Considering the pressure on overseas assets and the uncertainty of downstream customer demand, the adjusted 24-26 net profit was 0.16 billion yuan, 0.37 billion yuan, and 0.54 billion yuan (previous values were 0.32 billion yuan, 0.52 billion yuan, 0.7 billion yuan). The year-on-year growth rates of net profit to mother in 24-26 were 222%, 131%, and 43%, respectively. The corresponding 24-26 PE is 45X, 19X, and 14X, respectively, and the adjusted rating is an “gain” rating.

Risk warning: overseas falls short of expectations, core customer demand falls short of expectations, profit recovery falls short of expectations, etc.