Incident: On the evening of July 15, 2024, the company issued a voluntary disclosure notice for the 2024 semi-annual results forecast. According to the company's announcement, in the first half of 2024, the company is expected to achieve revenue of 2.4 billion yuan to 2.5 billion yuan, an increase of 124% to 133% over the previous year; it is expected to achieve net profit of 1.35 to 0.155 billion yuan, which will increase by 0.2-0.22 billion yuan compared with the same period last year, and is expected to reverse losses year on year.

24H1's performance increased significantly year-on-year, and the net interest rate due to mother increased sharply in the 24Q2 single quarter. Looking at 2024Q2 in a single quarter, the company expects to achieve revenue of 1.563-1.663 billion yuan, an increase of 153%-169%, and an increase of 87%-99%; net profit to mother of 0.121-0.141 billion yuan is expected. In 24Q2, the company's revenue side continued to achieve significant growth based on the year-on-year increase in Q1; in terms of profitability, the net profit margin for the 24Q2 single quarter reached the 7.3% -9.0% range, while the net profit margin to mother for 24Q1 was 1.67%, and the net profit margin for the 24Q2 single quarter increased 5.60-7.35 pct month-on-month, and is expected to achieve a significant increase in net interest rates.

New products help the smart security business recover, and the high-end 50M mobile CIS continues to help the company's performance increase. The company mainly has three major businesses: smart security, smart phones, and automotive electronics. The sharp increase in 24H1 revenue and net profit mainly comes from marginal changes in the smart security and smartphone business: (1) Smart security: The company's smart security business includes security monitoring business and machine vision business. Machine vision products have been used in industrial manufacturing and logistics, as well as emerging application fields represented by drones, sweeping robots, and AR/VR. 24H1's newly launched iterative products in the field of smart security have once again improved in terms of performance and competitiveness. As market demand picked up, the company's product sales increased significantly, and sales revenue increased significantly. (2) Smartphones:

The company's shipments of high-end 50 million pixel products used in flagship mobile phone main cameras, wide-angle, and telephoto lenses have risen sharply, cooperation with customers has deepened across the board, and its market share has continued to increase, and it has become the second growth curve.

The company introduced new products repeatedly, and R&D continued to bear fruit, complementing major product lines to help long-term development. In January 2024, the company launched the SC580XS, the first 50 million pixel 1/1.28 inch product, which can be used for flagship camera cameras; in February of the same year, it launched the 50 million pixel product SC5000CS, which has a pixel size of 0.702 μm and can be used for mainstream smart camera owners; in March, the company launched the 16 million pixel product SC1620cs, which can be used for smartphone rear main camera, rear ultra-wide angle and front camera; in June, the company launched a 13MP resolution 1/3.06 inch product The SC130HS can be used for high-end smartphone front cameras and mainstream smartphone main cameras. The iteration of the company's new products reflects the company's efficient R&D and ensures the completeness and richness of the company's mobile CIS product line, which is expected to help the company continue to grow rapidly in the CIS mobile phone business.

Investment advice: The company's 24H1 performance surpassed expectations year-on-year. Based on this, we raised the company's 24-26 profit forecast. We expect to achieve revenue of 5.77/7.45/9.22 billion yuan in 24-26, and achieve net profit of 0.43/0.63/0.84 billion yuan. With a market value corresponding to July 16, PE was 53/36/27 times, respectively, maintaining the “buy” rating.

Risk warning: risk that downstream demand recovery will fall short of expectations; competition increases risk; risk of corporate technological innovation.