Key points of investment

Overall positive orders supported 24H1's high year-on-year growth in performance

On July 11, the company released its 2024 semi-annual performance forecast. The 2024H1 net profit is expected to be 0.16-0.19 billion yuan, up 141.67%-186.98% year on year; after deducting non-net profit, it is estimated to be 0.15-0.18 billion yuan, up 153.83%-204.6% year on year.

The reason for the increase in performance is: in terms of photovoltaic brackets, with the commissioning of US factories, orders are being released one after another, and efficiency is increasing; in terms of connectors, with the development of domestic Internet, big data and other industries, demand for servers and data centers continues to increase, and the company's connector business orders increased compared to the previous year, and sales revenue increased.

According to the performance forecast calculation, the net profit center of 2024Q2 was 0.088 billion yuan, up 74.5% year on year, the same as Q1. We judge that this was due to the increase in shipping freight rates in the second quarter, and the pace of revenue confirmation lagged behind.

Demand for PV brackets is strong, and production lines will continue to increase in Q2/Q3

Downstream demand for photovoltaic stents is still very strong. The US market covers major customers such as NexTracker, GCS, and FTC Solar, and the cooperative relationship is stable. Currently, production capacity in US factories continues to rise, and production lines will continue to increase in the second and third quarters according to customer demand. In the future, with the gradual easing of shipping problems and the introduction of additional production capacity, the photovoltaic stent business is expected to release results at an accelerated pace.

High-speed connectors benefit from high popularity in fields such as intelligent computing power

Company communication connectors are mainly used in communication equipment, base stations, data centers, servers, etc., and customers include Huawei/ZTE 3. In the field of traditional RJ communication connectors, the company's comprehensive strength is at the forefront of the domestic industry; in the field of high-speed communication connectors, the company is one of the few domestic enterprises to achieve mass production of high-speed connectors. It has a first-mover advantage. Next-generation high-speed connectors such as 400G (including copper cable connectors) can be used in server and other application scenarios, and have achieved batch delivery, benefiting from the high downstream boom, and is expected to continue to grow in the future.

In the field of consumer electronics and automotive connectors, the company has a series of well-known international and domestic customers, including Zhengwei, Flextronics, Morse, Full Rise, FCI, etc. A large number of high-quality customer resources can provide convenient conditions for the company to further expand its market and product application fields, and is expected to contribute to steady growth momentum.

Profit forecasting and valuation

As overseas production capacity climbs and downstream demand improves, the company's performance is expected to grow rapidly. The company's 2024-2026 revenue is expected to be 7.581, 9.474, 11.178 billion yuan, up 49.9%, 25.0%, 18.0% year on year, and net profit to mother of 0.402, 0.541, 0.663 billion yuan, up 229.0%, 34.6%, 22.5% year on year, corresponding to PE 19.6, 14.5, and 11.9 times, maintaining the “buy” rating.

Risk warning

Shipping capacity is tight; order release falls short of expectations; risk of international trade conflicts; product development falls short of expectations, etc.