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The company released its results report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 3.367 billion yuan, a year-on-year increase of 9.55%; net profit to mother was 0.425 billion yuan, a year-on-year decrease of 48.05%; net profit after deducting non-return to mother was 0.414 billion yuan, a year-on-year decrease of 49.11%. Among them, the company achieved operating income of 1.083 billion yuan in the third quarter, down 23.13% year on year and 1.13% month on month; net profit to mother was 0.071 billion yuan, down 84.29% year on year and 54.63% month on month.

Comment:

L-pamid has been validated by some brand customers and mass-produced on a 12-inch IPD platform. In 2024, new models of Android phone brands were released mainly in Q4, and the overall inventory strategy was cautious. As a result, downstream mobile phone manufacturers were still weak in Q3, and the company's revenue is expected to resume growth in the fourth quarter. 1) The 6-inch filter wafer production line has complete manufacturing capabilities, covering all types of product forms to meet the diversified needs of customers. The product category has achieved a comprehensive layout. The company has gathered core resources to lay out technical research and development of the L-PAMID module product at the launch end, which has reached the mainstream level of the industry. The product line has been verified by some brand customers. 2) The 12-inch IPD platform is mass-produced, and the proportion of L-pamif, LFEM and other related module products using self-produced IPD filters has reached a high level. The RF switch and low noise amplifier process production line also entered mass production in the second quarter of 2024, and production capacity continued to rise. Among them, self-produced RF switches have been mass-produced and shipped. The volume of this type of product has gradually increased on the client side, covering many brand customers and the vast majority of ODM customers.

Relying on an efficient resource platform, the RF module market continues to expand. With an efficient resource platform business model, the company actively expands the RF module market while consolidating the market share of its original superior products.

Among them, self-built production line filter products are gradually being sold to brand clients, and market share and penetration rate are gradually increasing. Filter modules have become an important driving force for performance growth.

Focus on characteristic process platforms to strengthen core competitiveness. The company's strategic focus is on comprehensively building a unique process resource platform for RF front-end chips, expanding RF product processes and autonomous manufacturing capabilities, and strengthening modular and systematic solutions. The company will make full use of its brand and other collaborative advantages to create coverage of the entire RF product line, increase the penetration rate of high-end products, and lay a solid foundation for leading the RF industry in the future.

Profit forecast and investment rating: We expect net profit for 2024/2025/2026 to be 0.544/0.794/1.063 billion yuan, corresponding PE to 90/61/46 times. Considering that the company is the first RF front-end company in China to have an independent wafer production line and achieve nationwide production in the supply chain, it is expected to achieve a pioneering breakthrough in cost reduction for mature products and domestic substitution of high-end products in the future as the scale effect of production lines becomes prominent, maintaining the “buy” rating.

Risk warning: downstream demand falls short of expectations, industry competition intensifies, raw material costs fluctuate