Core views:

The company disclosed its 2024 semi-annual results report. In the semi-year 2024, we achieved revenue of 1.86 billion yuan (YoY +38.8%), net profit of 0.21 billion yuan (YoY +20.4%), net profit of 0.19 billion yuan (YoY +44.8%) after excluding the impact of exchange earnings, and a net profit margin of 11.1% (YoY-1.7pct). Based on this calculation, 24Q2 achieved revenue of 1.04 billion yuan (YoY +33.4%), net profit to mother of 0.12 billion yuan (YoY -6.3%), and a net profit margin of 11.7% (YoY-5.0pct).

Orders from major customers continue to be introduced, and revenue continues to be high. (1) Home appliances: The company adheres to the strategic major customer cooperation route. According to the 2023 annual report, the company introduced a new internationally renowned small household appliance company, SharkNinja (Shang Kening Family) to begin strategic cooperation, which includes products such as hair dryers, vacuum cleaners, fans, air purifiers, etc. It is expected that orders for multiple categories and SKUs will gradually be mass-produced this year, contributing to the main incremental revenue; according to the 2023 annual report, TTI, the original strategic customer, ended its inventory, and business demand resumed steady growth. (2) Auto Zero: According to the 2023 annual report, the company's new projects continue to be targeted and mass-produced, and the company's auto parts business continues to maintain a rapid growth trend.

Foreign exchange earnings were high during the same period. Despite the apparent decline, profits in the main business actually improved. According to the company's annual report, the company achieved exchange earnings of 49.5 million yuan and 36.11 million yuan for the full year of 2023H1 and 2023, that is, from an exchange perspective, the base pressure was mainly concentrated in the first half of the year. Considering the overall stability of the exchange rate trend since this year, exchange earnings are expected to be relatively small, and the profitability of the main business actually improved after excluding exchange. Looking ahead, the company's revenue side is expected to continue to grow at a high rate under the logic of major customers, and achieve cost reduction and efficiency by improving the self-control rate of core links, integrating and improving supply chain resources, and upgrading process equipment. It is expected that profitability will gradually increase.

Profit forecast and investment advice: Net profit of 0.42, 0.54, 0.68 billion yuan is expected to be achieved in 24-26, +31%, +28%, and +26% year-on-year. Referring to comparable company valuations and the company's long-term growth, a 24-year PE 18x, corresponding to a reasonable value of 20.44 yuan/share, was given a “buy” rating.

Risk warning: high customer concentration, trade tariff risk, raw material price fluctuations, etc.