Incident: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 1.478 billion yuan, -0.60%; realized net profit to mother of 0.192 billion yuan, +1.33% year-on-year; realized deducted non-net profit of 0.189 billion yuan, +0.74% year-on-year. Among them, Q3 achieved revenue of 0.474 billion yuan, -8.63% year-on-month, and -5.92% month-on-month; realized net profit of 0.045 billion yuan, or -39.63% year-on-year, and -40.27% month-on-month; realized deducted non-net profit of 0.044 billion yuan, or -39.98% year-on-year and -40.53% month-on-month.
Short-term pressure on performance, depreciation and expenses affect profits: 24Q3 saw a decline in the company's performance, mainly affected by Panasonic's major terminal customers' own strategy adjustments and short-term sales delays and delivery delays. The company is waiting for customers to actively adjust and respond, and the next generation of products is being followed up one after another. By product, automotive electronics as a whole accounted for more than 50% of revenue, of which the growth rate of new energy vehicles was still above 20%; smart terminals accounted for 20% to 30% of revenue, recovering from month to month. The company's gross margin for the first three quarters of 2024 was 26.96%, +0.39pct year on year; net margin was 12.99%, +0.25pct year on year. 24Q3 gross margin was 24.42%, -3.80pct year on year, -3.06pct; net margin was 9.41%, 4.86pct yoy, -5.44pct month-on-month.
Q3 Profitability is under pressure, mainly affected by depreciation of NEV industry bases, employee incentive share payments, and short-term exchange rate fluctuations. In terms of expenses, 24Q3 sales/management/R&D/finance expenses were 1.57%/6.60%/3.63%/1.80%, respectively, -0.52/+0.31/+0.02/+2.63pct. The increase in financial expenses is mainly due to the increase in interest on the company's convertible bonds and the impact of exchange rate fluctuations.
The NEV business continues to grow rapidly and is steadily advancing production capacity: The company is a leading domestic automotive molding company. By further clarifying the strategic positioning of core components in the field of NEV electrical components, it has achieved fixed increments from single products to platform-based products and expansion of multiple categories of products. The company is developing leading international and domestic customers in an orderly manner, rapidly expanding from a single Panasonic customer to the target of more leading brand customers such as Hitachi Astemo, Nidec, CRRC, etc., and providing products to more new domestic and foreign models through it, rapidly penetrating international and domestic terminal models covered by the NEV parts business. The product line has expanded from new energy vehicle batteries and electronic control inserts to intelligent components such as millimeter-wave radars, connectors, and sensor-related structural parts, and the value of bicycles continues to increase. The company continues to promote rapid growth in the NEV business with the successive release of early terminal models, a product matrix centered on mosaic technology and high-quality customer resources around the world. Furthermore, in April '24, the company launched the Suzhou NEV parts production expansion project, and the Cixi NEV parts base was officially put into operation in May. In order to implement customer needs in the overseas automotive electronics and server structural parts business, the company announced in July that it would establish a subsidiary and invest in the construction of a production base in Thailand.
We believe that with the successive commissioning of the company's plants and the continuous release of production capacity, the company's performance is expected to improve.
Smart terminals are expected to resume growth, and AI-enabled hardware support upgrades: 24Q3 increased the company's smart terminal business order delivery, with a month-on-month growth rate of 10%-20%, gradually picking up. As the company's product matrix was upgraded from single-function structural components to structural model components, and the smart meter series was added to mass production, the average sales price of smart terminal components increased. In the future, with the rapid development of AI technology and the accelerated spread of intelligence, demand for basic equipment represented by connectors, network devices, computing power devices, and storage devices is expected to grow rapidly. Demand for new smart terminal hardware will become a future growth point for the market. We are optimistic that the company will seize industry opportunities, and the smart terminal business will resume its growth trend in the future.
Maintaining a “buy” rating: The company's NEV electrical equipment business continues to introduce new customer projects, the Cixi NEV parts industry base was successfully put into operation, and the Suzhou base began to expand production, laying the foundation for the automotive electronics business to continue to grow rapidly in the future. The smart terminal business has achieved horizontal product line expansion. With the gradual implementation of technologies such as 5G, WiFi6/WiFi7, the Internet of Things, and AI artificial intelligence in the smart terminal field, demand for basic devices represented by driving connectors, network equipment, computing power devices, and storage devices is expected to grow rapidly. The company is looking ahead to deploying new production capacity in Thailand, and the server business is expected to increase the company's performance growth rate. It is estimated that in 2024-2026, the company's net profit to mother will be 0.27 billion yuan, 0.33 billion yuan, and 0.405 billion yuan respectively, and EPS will be 0.91 yuan, 1.11 yuan, and 1.36 yuan respectively. The corresponding PE is 20X, 16X, and 13X, respectively.
Risk warning: Risk of macro-environmental fluctuations, new business development falling short of expectations, risk of fluctuations in raw material prices, and intensification of industry competition.