Core views

In the first half of 2024, the controller industry picked up. In the second quarter, the company's revenue continued the growth trend in the first quarter, and gross margin continued to rise. It is expected that the second quarter will achieve net profit of 0.186 billion yuan to 0.237 billion yuan, an increase of 15%-47% over the previous year. The second quarter of last year had a significant impact on exchange. After deducting the impact on exchange earnings, profit increased significantly year-on-year. The US is expected to start cutting interest rates in 2024, and a series of domestic real estate policies are expected to boost real estate sales, which in turn is expected to further boost demand for intelligent controllers. Actively promoting a global layout, we have production capacity layouts in Vietnam, India, Romania, Mexico and other places. Overseas factories will account for 16% of the output value in 2023, helping the company further increase its market share and consolidate its leading edge.

occurrences

The company released a semi-annual performance forecast for 2024. It is expected to achieve net profit of 0.361 billion yuan to 0.413 billion yuan in the first half of 2024, an increase of 40% to 60% over the previous year; net profit without deduction of 0.356 billion yuan to 0.407 billion yuan, an increase of 40% to 60% over the previous year.

Brief review

1. Revenue and profit both increased in the first half of the year, and Q2 performance increased sharply.

In the first half of 2024, the industry boom picked up, and the market share of the company's leading customers and high-value products continued to increase, achieving both revenue and profit growth. On the business side, demand for home appliances and tools has returned to normal, and the new energy industry is also being cleared at an accelerated pace as demand recovers. The company's new products represented by charging piles, BMS, and PCS have been introduced to the market and contributed incrementally. The company expects to achieve net profit of 0.361 billion yuan to 0.413 billion yuan in the first half of 2024, an increase of 40% to 60% over the previous year; net profit without deduction of 0.356 billion yuan to 0.407 billion yuan, an increase of 40% to 60% over the previous year.

In the second quarter of 2024, the company's revenue continued to grow in the first quarter, and gross margin continued to rise. The company expects to achieve net profit of 0.186 billion yuan to 0.237 billion yuan in the second quarter of 2024, an increase of 15% to 47% over the previous year. There was a significant impact on exchange in the same period last year. After deducting the impact on exchange earnings, the company achieved a significant year-on-year increase in profit.

2. The US is expected to start cutting interest rates, which is beneficial to the release of demand.

The company's controller products are mainly aimed at global home appliances, tools and other fields. Changes in demand are related to real estate demand, manufacturing investment, technology upgrades, inventory, replacement cycles, etc., and are particularly highly related to real estate demand and inventory conditions. Beginning in the fourth quarter of 2023, client warehousing has basically ended, delivery speed has returned to normal, and overall demand has recovered moderately. Currently, it continues to maintain a good recovery trend. The US is expected to start cutting interest rates in 2024, and a series of domestic real estate policies are expected to boost real estate sales, which in turn is expected to further boost demand for intelligent controllers.

3. Continue to promote the global layout and consolidate the leading edge.

The company has mature experience in process system construction and operation. The global strategic layout will help expand overseas markets, further increase market share, and consolidate its leading edge. Currently, in addition to Southeast Asian countries such as Vietnam and India, the company also has production capacity layouts in Romania and Mexico, forming localized delivery capabilities. Overseas factories will account for 16% of the output value in 2023.

4. Investment advice.

The overall demand for controllers has recovered moderately. Currently, it continues to maintain a good recovery trend. If the US enters a cycle of interest rate cuts, it is expected to further catalyze demand. With the continuous enrichment of the company's product matrix, the strengthening of the competitiveness of superior products, and the gradual reflection of the company's overseas production capacity advantages, the company continues to have a lot of room to increase its market share in the fields of home appliances, tools, and new energy sources. At the same time, the company is actively developing new fields such as AI and robotics, which is expected to drive new growth in the future. Through continuous product innovation, cost reduction and efficiency, etc., the company's profitability is expected to increase further in the future. We expect the company's revenue for 2024-2026 to be 10.65 billion yuan, 12.75 billion yuan, and 15.1 billion yuan, respectively, and net profit to mother of 0.75 billion yuan, 0.96 billion yuan, and 1.2 billion yuan respectively. The corresponding PE is 18x, 14x, and 11x, respectively, maintaining a “buy” rating.

5. Risk warning: Changes in the macroeconomic environment affect consumer demand in the terminal market, the home appliance and power tool business falls short of expectations; market competition intensifies, affecting the company's supply share of major customers, or leading to a decline in the company's gross margin; declining competitiveness of major customers, affecting the company's related business growth; trade policy changes affecting the company's raw material supply and product delivery; chip shortage and price increases exceeding expectations, affecting the company's gross profit margin; sharp exchange rate fluctuations affect the company's gross margin and exchange profit and loss; the revenue growth rate of the new energy business falls short of expectations; the gross margin of the new energy business falls short of expectations; the gross margin of the new energy business falls short of expectations; the company's production efficiency Upgrades, supply chain optimization, and cost control fell short of expectations.