The company released its 2024 semi-annual performance forecast. 24H1 revenue achieved year-on-year growth, and profitability improved significantly. The penetration rate in the consumer electronics, new energy, and communications sectors is gradually increasing, and server cooling products are progressing smoothly, maintaining a “buy” rating.

Key points to support ratings

24H1's revenue increased year over year, profit improved significantly, and 24Q2 showed an upward trend month over month. The company expects 24H1 to achieve operating income of about 2.17 billion yuan, an increase of 22.05%, a net profit of 0.54 to 0.064 billion yuan, an increase of 1243.65% to 1492.48%; net profit after deducting non-return to mother of 0.47 to 0.057 billion yuan, an increase of 540.78% to 634.56%; looking at a single quarter, the company expects 24Q2 to achieve operating income of 1.188 billion yuan, an increase of 18.21%/20.90% increase to mother net profit 0.30 to 0.04 billion yuan, median increase of 21.35% /annum increase of 49.63%, net profit without return to mother of 0.27 to 0.037 billion yuan, median increase of 33.33% /60.00%.

The 24H1 consumer electronics, new energy vehicles, and communications fields have all increased, and the server business is progressing smoothly. 1) Consumer electronics: Benefiting from the recovery of major customer business, the continued increase in shipments, and the increase in the market share and order volume of the company's terminal products such as mobile phones and laptops, leading to a significant year-on-year increase in revenue in this field, increasing gross margin and increasing profitability; 2) New energy: The company's NEV business order volume continues to grow, and gross margin has declined due to factors such as rising raw material prices, introduction of new customers, and sampling of some new projects; 3) Communications: The company's market share in the communications sector has increased, and gross margin has increased significantly. The company's server-related business is developing smoothly. It has cooperated with customers to develop a variety of liquid cooling products and special radiators such as 3D-VC/VCE, and some products have been delivered in small batches.

The slight month-on-month decline in mobile phones in 24Q2 has now gradually recovered, and the photovoltaic inverter and energy storage business is in urgent need of steady growth. 1) Mobile phones: Affected by delays in some mobile phone projects, the company's mobile phone business declined sequentially in 24Q2, but currently related business orders have gradually resumed delivery; 2) PV inverters and energy storage: orders have declined due to the market environment, and the revenue situation has not met expectations. However, the company will continue to speed up the layout and expand the customer and business layout of thermal management and electromagnetic shielding solutions to meet the cooling and electromagnetic shielding needs of different customers. The business in related fields may advance steadily.

valuations

Considering the gradual recovery of consumer electronics demand, the company's cooling and shielding business may be driven by multi-dimensional growth in the AI era, but due to the impact of the overall market environment and business progress, some businesses fell slightly short of expectations. We adjusted profit forecasts. The company expected to achieve operating income of 5.432/6.247/7.184 billion yuan in 2024/2025/2026, and net profit to mother was 0.276/0.375/0.465 billion yuan, corresponding to PE 31.4/ 23.1/18.6 times Maintain a “buy” rating.

The main risks faced by ratings

Market competition intensified, downstream demand fell short of expectations, and customer product verification and shipment fell short of expectations.