occurrences

The company released its 2024 semi-annual report. In the first half of 2024, it achieved operating income of 1.842 billion yuan, an increase of 27.22% year on year; net profit to mother was 0.387 billion yuan, up 104.51% year on year; net profit after deducting non-return to mother was 0.289 billion yuan, an increase of 52.59% year on year.

For 24Q2 alone, 2024Q2 achieved operating income of 0.979 billion yuan, a year-on-year increase of 31.98%; net profit to mother was 0.262 billion yuan, an increase of 123.67% year-on-year, and net profit not returned to mother was 0.164 billion yuan, an increase of 41.22% year-on-year.

reviews

Non-profit deduction exceeded previous performance forecast expectations, and the charging pile business maintained rapid growth

According to the performance forecast previously released by the company, the first half of 2024 is expected to achieve revenue of 1.83-1.85 billion yuan, net profit to mother of 0.38-0.39 billion yuan, and net profit of 0.26-0.28 billion yuan after deducting non-return to mother. The company's actual net profit after deduction for the first half of 2024 exceeded the expectations of previous performance forecasts.

By business, the digital maintenance business (that is, the business related to automobile diagnosis) and the digital energy business (that is, the charging pile business) have both achieved good growth. In particular, the charging pile business has maintained a high growth trend:

1) Digital maintenance business: The first half of 2024 achieved revenue of 1.438 billion yuan, an increase of 18.04% year on year, and achieved revenue of 0.75 billion yuan in a single quarter in 24Q2, up 25% year on year, faster than 24Q1. Specifically, in the first half of 2024, comprehensive automotive diagnostic products, TPMS, ADAS intelligent inspection and calibration, and software upgrade service businesses achieved revenue of 6.08, 0.329, 0.177, and 0.211 billion yuan respectively, corresponding year-on-year growth rates of 1.78%, 33.83%, 23.97%, and 26.32%, respectively. Among them, TPMS and ADAS intelligent inspection and calibration have each benefited from replacement cycles and the trend of intelligent automotive technology, achieving relatively rapid growth. The company's related products have a first-mover advantage in the industry, and continue to lead the industry trend in terms of model compatibility, update speed, usage efficiency, portability, and integration.

2) Digital energy business: The first half of 2024 achieved revenue of 0.378 billion yuan, a year-on-year increase of 92.37%, and achieved revenue of 0.218 billion yuan in a single quarter in 24Q2, an increase of 85% year-on-year, maintaining a high growth trend. The company's digital energy business continues to break through in North America, Europe, Asia Pacific and other regions, and its footprint is rapidly expanding globally.

Charging infrastructure is developing rapidly. On the one hand, I am optimistic about the company's second growth curve. There is huge demand for overseas charging piles. According to the International Energy Agency, the number of public charging stations in the US market will grow from 0.18 million in 2023 to 1.7 million in 2035; the number of public charging stations in the European market will increase from 0.7 million in 2023 to 2.7 million in 2035; and the number of public charging stations in other regions overseas will increase from 0.29 million in 2023 to 2.4 million in 2035.

On the other hand, many governments have introduced subsidies to speed up the construction of charging infrastructure. For example, the North American government has introduced a total of 7.5 billion US dollars in subsidy funds, including the NEVI Act and the CFI Act, and Europe has introduced a cumulative total of billions of euros in subsidy funds including EU AFIF, Germany's Deutschlandnetz, and UK RCF to support the construction of local public charging stations.

Announcing the 2024 Mid-Term Profit Distribution Plan to Consolidate Shareholder Returns

The company announced the 2024 semi-annual profit distribution plan. It plans to distribute a cash dividend of RMB 4 (tax included) for every 10 shares, no bonus shares, and no capital increase from the Provident Fund. According to the company's dividend plan, the dividend is expected to pay a cash dividend of 0.176 billion yuan, accounting for 45.62% of net profit to mother in the first half of 2024.

Profit forecasting and valuation

We maintain our previous profit forecast. We expect the company's revenue for 2024-2026 to be 3.984, 5.034, and 6.274 billion yuan, respectively, up 22.54%, 26.36%, and 24.63% year-on-year, respectively; net profit to mother will be 0.495, 0.648, and 0.835 billion yuan. Maintain an “Overweight” rating.

Risk warning

The implementation of new energy charging piles and ADAS products fell short of expectations; market competition intensified; changes in the policy environment; tariffs increased dramatically