The company announced the third quarter results: the company's revenue in the first three quarters of 2024 was 733 million/yoy-13.32%; net profit attributable to the parent company was 132 million/yoy-35.58%; net profit attributable to the parent company after deducting non-profits was 121 million/yoy-33.37%; Among them, the revenue in 24Q3 was 211 million/yoy-7%, the net profit attributable to the parent company was 19 million/yoy-40.3%, and the net profit not attributable to the parent company was 24 million/yoy+2.4%. In the first three quarters of 24, the company's performance was under pressure due to the reduction of capital expenditure in the downstream lithium battery industry and the relatively flat impact of the 3C industry, but the company, as a leading domestic machine vision software and hardware enterprise, is expected to benefit from the growth of the 3C industry brought about by the upgrading of consumer electronics terminal products and the recovery of the lithium battery industry to the company's products, and maintain an "overweight" rating.

Profit margin declined, and the selling/R&D expense ratio increased due to revenue pressureIn the first three quarters of 24, the company achieved a gross profit margin of 64.23%, down 2.1 pct year-on-year, and a net profit margin of 17.99%, down 6.22 pct year-on-year. In 24Q3, the company achieved a gross profit margin of 59.84%, a year-on-year decrease of 3.93 pct, and a net profit margin of 8.81%, a year-on-year decrease of 4.92 pct, and its profitability declined.

In terms of expense ratio, in the first three quarters of 2024, the company's sales expense rate/management expense rate/R&D expense rate were 23.60%/3.36%/21.33% respectively, and the selling/R&D expense rate increased by 3.89pct/2.37pct year-on-year, mainly due to the decline in operating income but relatively fixed expenses, and the management expense rate decreased by 0.01pct year-on-year. The

lithium battery industry is affected by the reduction of capital expenditure, the demand is slowing down, waiting for the 3C industry to continue to recover, and the downstream applications of the company's machine vision products are mainly lithium batteries and 3C industries. At present, the lithium battery industry focuses on the increase in capacity utilization, the corresponding reduction of capital expenditure, the slowdown in demand for new equipment, and the subsequent expansion of overseas demand/continuous penetration of new energy vehicles will be the key to demand recovery. The short-term recovery of the 3C sector has slowed down, mainly due to the weak capital expenditure of downstream customers. However, with the subsequent release of Apple's AI mobile phones, consumer electronics is expected to usher in a stronger recovery, driving the growth of the company's application devices in the 3C field.

In addition to the traditional visual component products such as vision algorithm library, intelligent vision platform, deep learning (industrial AI), light source, light source controller, industrial lens, industrial camera, etc., the company has also expanded vision sensor products such as smart barcode readers, 3D sensors, and one-key measurement sensors. In the first half of the year, the company increased its investment in overseas markets, set up a Vietnamese company, and increased the resource investment of the Indian office to support the development of the local business market.

Give the company a target price of 67.5 yuan and maintain an "overweight" rating

Considering the slowdown in downstream demand and the year-on-year pressure on the company's revenue, we have lowered the revenue growth rate of the company's machine vision products in the downstream lithium battery industry and 3C industry, and we expect the company's EPS in 2024-2026 to be 1.93, 2.25, and 2.53 yuan respectively (the previous value is 2.06, 2.44, and 2.76 yuan in 2024-2026). The average PE of comparable companies in 25 years is 28.93 times, considering that the company is a leader in machine vision software and hardware, giving the company 30 times PE in 25 years, with a target price of 67.5 yuan, and maintaining an "overweight" rating.

Risk warning: the risk of concentration of downstream industries and customers; The risk of a decrease in the price of the product.