An overview of the incident. The company disclosed its 2024 semi-annual performance forecast: the company expects to achieve net profit of 0.4-0.42 billion yuan in the first half of 2024, +40.1% to 47.1% year-on-year; it is expected to achieve net profit without deduction of 0.35-0.37 billion yuan, or +35.4% to 43.1% year-on-year. According to the announcement, the company is expected to achieve net profit of 2.1 to 0.23 billion yuan in 2024Q2, an increase of 31.5% to 44.2% year on year and 8.9% to 19.3% month on month;

The results of the global layout are beginning to show that 2024H1 is profitable in North America. The company expects to achieve net profit of 2.1 to 0.23 billion yuan in 2024Q2, overcoming adverse factors such as rising raw materials and rising shipping costs, and achieved year-on-month growth in business performance. We judge that the main reasons are: 1) The company continues to focus on improving operating profit margins through measures such as reducing procurement costs, reducing design costs, improving quality, speeding up asset turnover, and improving production line efficiency; 2) The company achieved phased results in “localized manufacturing and global operation”. The Mexican factory successfully supplied multiple categories of products to major North American customers after production began. 23Q4 has achieved profit and loss balance in a single quarter. With the successive commissioning of new projects in 24 years, the 24H1 North American region achieved overall profit, contributing to the company's performance growth; 3) The 24H1 natural gas heavy truck market maintained a high level of prosperity. The company is the supplier with the largest share of domestic gas engine EGR products, covering leading domestic and international engine customers, fully benefiting from the increase in the penetration rate of natural gas heavy trucks.

The new energy thermal management business is growing rapidly, and “1+4+N” products continue to expand. The company continues to develop new energy customers, covering major North American customers such as BYD, Ideal, Xiaopeng, Cyrus, Xiaomi, Zeros, Volvo, etc. In 2023, the company's passenger car new energy business grew rapidly, and its market share continued to increase. In addition, the company has successively received orders from North American customers for chip cooling systems and supercharged cooling modules, BYD front-end modules and brushless fans, Ningde Era water cooling panels, Volvo front-end modules and integrated modules, new domestic car builders, ideal automotive air conditioning piping assemblies and brushless fans, etc., and the development of the new energy business has reached a new level.

The third growth curve is imminent, and on-hand orders continue to break through. Since 2021, the company has developed the third curve business and established a digital and energy thermal management division, focusing on data center liquid cooling, power generation and transmission, energy storage and PCS liquid cooling systems. The 2023H1 received heat pump and energy storage board replacement orders from customers such as Oaks, Tongfei, and Invic, and fixed targets for solar power energy storage and photovoltaic inverter liquid cooling units; in March 2024, it also obtained a project breakthrough, and obtained a target for a large-scale cooling module project for commercial equipment from an internationally renowned machinery and equipment company. We expect that starting in 2024, with mass production of related projects, the third curve will bring significant performance increases to the company and support the company's long-term growth.

Investment advice: We are optimistic about the company's three-dimensional expansion of products, projects & customers in the field of thermal management for new energy vehicles, as well as the global layout and third curve to provide a strong development engine for the company's medium- to long-term development. We expect the company's 2024-2026 revenue to be 13.61/16.31/19.3 billion yuan, with net profit of 0.852/1.046/1.262 billion yuan respectively, and EPS of 1.03/1.26/1.52 yuan respectively. Corresponding to the closing price of 16.97 yuan/share on July 8, 2024, PE was 16/13/11 times, respectively, maintaining the “recommended” rating.

Risk warning: Demand for automobiles at home and abroad falls short of expectations, competition in the automotive thermal management industry intensifies, the company's new projects fall short of expectations, etc., the risk of fluctuating raw material prices, and the risk of fluctuating shipping costs.