Matters:

On July 2, the company released the “2024 Semi-Annual Performance Forecast”. Net profit for the first half of 2024 is expected to increase by 40%-60% year-on-year.

Commentary:

The half-year results achieved rapid growth. In the first half of 2024, the company expects to complete net profit of 0.361-0.413 billion yuan, a year-on-year increase of 40%-60%, and is expected to complete deducted net profit of 0.356-0.407 billion yuan, an increase of 40%-60% over the previous year. Based on the median value, 2024H1 is expected to achieve net profit of 0.387 billion yuan after deducting non-attributable net profit of 0.381 billion yuan, 2024Q2 net profit of 0.211 billion yuan, and net profit of non-return to mother of 0.212 billion yuan.

“Four electric appliances and one network” service “four major sectors”, inventory of household appliances and tools has returned to normal levels, and there is broad downstream demand space for intelligent controllers. The company provides leading customized intelligent control solutions for the “four major sectors” (home appliances, tools, new energy, industry) by building a comprehensive technical system of “four electricity and one network” (electronic control, motor, battery, power supply and IoT platform). At present, inventory of household appliances and tools has returned to normal levels. As the trend of specialized division of labor accelerates in the future, home appliance and tool manufacturers will continue to shift to professional third parties. Intelligent controllers have a wide range of downstream applications, large demand space, and growth is sustainable. Furthermore, the increase in the penetration rate of electrification and cordless technology in the tool industry, the increase in the market share of advantageous products in the home appliance business, the increase in the share of incremental markets and emerging markets, and the increase in the share of new energy control products and new products will all help the company achieve superior growth than the industry. At present, the company has become a leader in intelligent control solutions for the home appliance and tool industry, and is leading innovation in the new energy and industrial industries.

The new energy business continues to grow rapidly as a future growth point. Inventories in the field of new energy household storage are gradually being digested, and the company has added new categories such as PCS and all-in-one optical storage machines, which are expected to resume growth. In the field of industrial and commercial storage, the company has launched new products such as industrial and commercial storage BMS, industrial and commercial storage all-in-one machines, and DC charging piles, which will also gradually contribute to revenue growth. In the field of new energy, in the future, the company will focus on small and medium-sized energy storage, industrial and commercial storage, large storage, charging and other fields to increase sales of products and solutions.

Overseas production capacity layout is sufficient, and the controller market space is huge. The company's overseas bases are currently in the investment period, and profitability will continue to improve after large-scale mass production. The company's overseas production capacity will be invested according to business needs, and overseas markets will increase market-side investment and increase market share. Currently, the company accounts for more than 50% of overseas revenue. The contribution of overseas bases to overseas revenue is expected to increase further in the future, and may effectively avoid possible trade frictions. Looking forward to the future, the company believes that in the development of anti-globalization, its share will accelerate to Chinese companies with global operating capabilities. The company expects its market share in the home appliance sector to increase from 4% to 8%-10% of the target market, while the market share in the tool sector will increase from 10% to 20%-30%.

Investment advice: The company is leading the industry in the field of intelligent control, inventory of home appliances and tools has returned to normal levels, and the company's overseas production capacity is gradually rising. However, considering that demand recovery is slower than previously anticipated, we expect the company's revenue for 2024-2026 to be 10.487/12.4/14.714 billion yuan, respectively, and net profit to the mother is expected to be 0.745/0.915/1.112 billion yuan, respectively (the original value for 24-25 was 0.751/1 billion yuan).

Referring to comparable company valuations, the company was given a PE valuation of 24 times in 2024, with a target market value of 17.886 billion yuan, corresponding to a target price of 14.35 yuan, maintaining the “recommended” rating.

Risk warning: Prices of upstream components have risen, downstream demand falls short of expectations, and international trade frictions have intensified