Event: On August 8, 2024, the company released its 2024 semi-annual report. The company 24H1 achieved revenue of 7.231 billion yuan, an increase of 8.9% over the previous year; realized net profit of 0.844 billion yuan, an increase of 15.3% over the previous year; realized net profit without deduction of 0.786 billion yuan, an increase of 4.2% over the previous year. The company's operating efficiency index was 0.602 million yuan per capita, an increase of 9.1% over the previous year. Looking at a single quarter, the company achieved revenue of 3.778 billion yuan in 24Q2, an increase of 11.89% over the previous year; realized net profit of 0.488 billion yuan, an increase of 21.6% over the previous year; realized a net profit of 0.453 billion yuan after deducting non-return to mother, an increase of 1.2% over the previous year. In terms of profitability, the company's 24H1 achieved a gross profit margin of 34.8%, a year-on-year decrease of 0.23pct, a net profit margin of 15.3%, and a year-on-year increase of 0.97pct. In terms of cost ratio, the company's cost rate during the 24H1 period was 17.8%, an increase of 1.74 pcts over the previous year.

The core category of relay products maintains a high speed of new product iteration and stabilizes market share. 24H1 established 193 new product projects in the relay category, an increase of 16% over the previous year. Product technology innovation and intellectual property layout were promoted in collaboration. In the first half of 2024, 412 patents were applied for in the relay field, of which 199 were invention patents, accounting for 48%. There are 94 domestic invention patents and 105 international invention patents.

Downstream relays: 1) Consumer electronics sector: Home appliances continued the recovery trend since the second half of last year, showing good restorative growth; the signal relay market achieved slight year-on-year growth, mainly due to major customers leaving inventory; 2) Industrial equipment sector: the demand boom in the industrial relay market has recovered, the decline has narrowed markedly, and demand has gradually stabilized and improved; 3) The power energy sector: benefiting from the rapid increase in global smart meter installations and continued market share. The company's power metering relay business continues to grow rapidly, and is currently using full capacity. The rate is already over 90 %. Market demand for wind and solar storage inverter supporting products has stabilized and rebounded; 4) Automobile traffic sector: The company's weak current vehicle relay business benefited from the increase in total downstream demand and a significant increase in market share, showing rapid year-on-year growth. The company's HVDC series products relied on obvious comprehensive competitive advantages and continued rapid year-on-year growth.

The new category has achieved remarkable results. The company firmly implements the “75+” strategy, and while promoting the high-quality development of its main relay business, it also promotes the steady development of five new categories of products: low-voltage electrical appliances, film capacitors, connectors, current sensors, and fuses. 24H1's low-voltage switch and complete business remained flat year-on-year. Affected by the downturn in the domestic construction distribution market, the company formed a new growth point by developing new energy, industrial, power grid and other application markets, and promoted the overall steady development of the low-voltage switch business. Breakthroughs have been made in other new categories such as film capacitors, connectors, current sensors, etc., and fuses have also been certified.

Investment advice: The company is a global relay leader, and the downstream growth trend is good. We expect the company's revenue for 24-26 to be 14.999/17.406/20.14 billion yuan, with growth rates of 16.0%/16.0%/15.7% respectively; net profit to mother is 1.609/1.879/2.195 billion yuan, respectively, with growth rates of 15.5%/16.8%/16.8% respectively. The closing price on August 8 corresponds to the company's 24-26 PE 18/15/13x, respectively. Maintain a “Recommended” rating.

Risk warning: the risk of new technology research and development, the risk of demand falling short of expectations, and the risk of increased competition.