Hongfa(SH:600885) HTSC·2025-10-31 06:46Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The company achieved Q3 revenue of 4.567 billion RMB, representing a year-over-year increase of 25.54% and a quarter-over-quarter increase of 4.65%. The net profit attributable to shareholders was 506 million RMB, up 18.95% year-over-year but down 8.58% quarter-over-quarter. For the first three quarters of 2025, the company reported a total revenue of 12.914 billion RMB, a year-over-year increase of 18.82%, and a net profit of 1.470 billion RMB, up 15.78% year-over-year [1][7] - The growth in revenue is primarily attributed to the sustained demand in the relay sector and the acceleration of new product categories, with expectations for continued performance growth driven by overseas markets and data centers [1][3] Summary by Sections Financial Performance - In Q3 2025, the gross margin was 35.35%, showing a quarter-over-quarter increase of 0.69 percentage points despite rising raw material costs and competitive pricing pressures. The net profit margin was 14.63%, down 1.03 percentage points year-over-year and 2.20 percentage points quarter-over-quarter, mainly due to an increase in the expense ratio [2] - The company generated a net cash flow from operating activities of 1.573 billion RMB in the first three quarters of 2025, reflecting a year-over-year increase of 30.49% [2] Product Development and Market Position - The company is strengthening its core business in relays while actively expanding into new product categories such as fuses and film capacitors. A five-year plan has been established to guide the achievement of phased goals and drive order and revenue growth [3] - The company is also developing modular solutions, such as high-voltage control boxes, to enhance product value and increase the self-manufacturing ratio of new product categories [3] Growth Opportunities - The company has a rich reserve of components and solutions for data centers, including relays, connectors, and various power distribution solutions. The shift from AC to DC power supply architectures in AI data centers is expected to enhance demand for the company's products, providing new growth momentum [4] Profit Forecast and Valuation - The company’s net profit forecasts for 2025-2027 have been adjusted upward by 1.30%, 2.10%, and 3.92% to 1.893 billion RMB, 2.195 billion RMB, and 2.590 billion RMB, respectively, with a three-year compound growth rate of 16.66%. The target price is set at 44.68 RMB, based on a PE ratio of 29.71 for 2026 [5]