On October 29, the company released its report for the third quarter of 2024. 24Q3 achieved revenue of 0.3 billion yuan, a year-on-year increase of 27.69%, achieved net profit of 20.67 million yuan, a year-on-year decrease of 76.40%, and deducted non-net profit of 17.68 million yuan from mother, an increase of 395.75% over the previous year. In the first three quarters of 2024, the company achieved revenue of 0.744 billion yuan, a year-on-year increase of 16.25%. Net profit to mother was 58.55 million yuan, a year-on-year decrease of 65.84%, and non-net profit to mother was -33.56 million yuan.

Revenue growth is picking up, and R&D investment continues to grow at a high rate. 24Q3 achieved revenue of 0.3 billion yuan, with a year-on-year growth rate of 27.69%. Following the -6.01% growth rate in Q2, the single-quarter revenue returned to a higher growth range. The company continues to increase R&D investment. 24Q3's R&D expenses were 0.193 billion yuan, an increase of 40.40% over the previous year. Continued strong R&D investment also provided solid support for the company's R&D and iteration of new products and technologies.

Industrial cooperation and college promotion are advancing at an accelerated pace. In July of this year, the company announced that Renesas Electronics had introduced Huada's 9-day Empyrean Skipper tool as its layout management solution to help it better solve the problems of hyperscale design. This introduction further confirms the competitiveness of the company's product strength. In August, the company launched two college textbooks based on the Huada Jiutian EDA platform in collaboration with well-known publishing organizations in China, such as the Electronics Industry Press and the People's Post and Telecommunication Press. This book is one of the domestic EDA textbooks series prepared by the Electronics Industry Press, and this set of domestic EDA textbooks has been selected and will be included in the IC design volume and EDA volume in Academician Wang Yangyuan's “Integrated Circuit Series”, respectively, and promoted in various universities, scientific research institutions, and the industry.

Profit forecast and investment advice: We continue to be optimistic about the company's future development prospects. Considering the fluctuation in the spending intentions of downstream customers and the company's continued to achieve good results in cost reduction and fee control since this year, we have adjusted the company's profit forecast.

We expect the company's revenue for 2024-2026 to be 1.229/1.575/1.969 billion yuan (previously forecast value 1.328/1.723/2.186 billion yuan), and net profit to mother of 0.105/0.218/0.327 billion yuan (previous forecast value 0.06/0.152/0.327 billion yuan), respectively, maintaining an “gain” rating.

Risk warning: risk of loss of technicians and rising technical personnel costs; risk of product development and technology upgrades falling short of expectations; competition risk due to relatively limited size and high concentration of the EDA market; risk caused by blocked investment, mergers and acquisitions or poor business coordination; risk of international trade friction, etc.