Introduction to this report:
The company announced a pre-increase in H1 performance for 2024, and the performance was in line with expectations. As downstream customers grow and raw material prices fall, the company's performance is expected to continue to grow in the future.
Key points of investment:
The target price was lowered to $28.25 (previously $32.08) to maintain an increase in holdings rating. The company released the 2024 H1 performance forecast. The profit was in line with expectations, maintaining the company's 2024/2025/2026 EPS of 1.49/1.84/2.21 yuan. Considering the impact of the EU countervailing investigation on some of the company's customers, the company was given 19 times PE in 2024, slightly lower than the average of comparable companies, and the target price was lowered to 28.25 yuan.
Profit for Q2 2024 is expected to increase significantly year over year. According to the company's announcement, net profit attributable to mother is expected to be 0.155 billion yuan to 0.16 billion yuan, an increase of 71.23% to 76.76% year on year; net profit without return to mother is 0.152 billion yuan to 0.157 billion yuan, an increase of 83.41 percent to 89.44% year over year. According to this calculation, net profit due to mother is expected to be 0.078 billion yuan to 0.083 billion yuan in Q2, up 47.9% to 57.4% year on year and 0.3% to 6.8% month on month; net profit without return to mother 0.076 billion yuan to 0.081 billion yuan, up 49.5% to 59.4% year on year, and -0.7% to +5.8% month on month.
Customers grew while benefiting from lower raw material prices. 2024H1's key customers, Xiaomi Auto, etc. performed well in sales, driving steady growth in the company's related business; the price of the main raw materials used by H1 dropped significantly year-on-year in 2024, and the company's stamping parts business profits are expected to improve; in addition, the company's split assembly business supports SAIC passenger cars. Affected by European countervailing investigations, SAIC Passenger Vehicle 2024H1 sales volume is -18.49% YoY. Subsequently, with SAIC's passenger car export structure adjustment, the company's split assembly business is expected to resume growth.
Strengthen the stickiness of high-growth new energy customers, and future performance is expected to grow further. High-growth NEV companies such as Xiaomi Motors are important customers of the company, and the release of popular models such as the SU7 in 2024 will bring significant performance increases to the company's stamped parts business. In June 2024, the company announced that it plans to invest 0.6 billion yuan to build the second phase of the Langfang Zhenhua Quanjing-Shen project, which will greatly help increase customer stickiness and increase the value of bicycles. On the customer side, the new project is beneficial to rely on the company's advantageous location to support new production capacity for customers such as Xiaomi, Ideal Auto, and BAIC; on the business side, it is conducive to expanding the production capacity of the company's sub-assembly business, and adding production capacity for stamped parts and thermoformed parts to increase the value of bicycles.
Risk warning: risk of declining sales of major customers; risk of rising raw material prices, etc.