Key points of investment:

Announcement: 1H24 achieved revenue of 0.873 billion yuan, up 15.2% year on year; net profit to mother of 0.218 billion yuan, up 47.5% year on year; net profit after deducting non-net profit reached 0.214 billion yuan, up 55.2% year on year. 2Q24's revenue reached 0.502 billion yuan, up 30.4%; net profit to mother reached 0.118 billion yuan, up 42.3% year on year; net profit after deducting non-net profit reached 0.131 billion yuan, up 76.0% year on year. 2Q24 The company's revenue and performance both exceeded market expectations.

The power sector continued to improve marginally, and the company's 2Q24 revenue growth rate exceeded expectations. Consumption took the lead in recovering in 2024. New energy inventories for photovoltaics picked up, demand for data centers, automotive electronics, etc. was catalyzed, and some of the company's products were in short supply or continued to be ordered. 2Q24's revenue increased by more than 30% over the same period last year. By product, as of 1H24, the company's SGT-MOSFET revenue reached 0.36 billion yuan, an increase of 40.3% year on year; Trench-MOSFET achieved revenue of 0.255 billion yuan, an increase of 19.64% year on year.

Actively adjust the product structure, and the expansion of automobiles and AI is smooth. As of 1H24, industrial automation accounted for 42% of revenue, photovoltaic energy storage 14%, automotive electronics 13%, AI computing power and communications 9%, pan-consumer electronics 18%, and intelligent short transportation 4%. 1) The company's automotive electronics are progressing smoothly. The number of products supplied by BYD exceeds 50%, and many models are used in OBC and DC conversion tri-electric power modules; 2) In AI computing power server applications, the company's related products have been used by leading overseas customers in the GPU field and have achieved mass sales, and more material numbers have been verified. Many products are SGT series.

Inventories are gradually being eliminated, and gross margin continues to improve. 1) As of the first half of 2024, the company's inventory was 0.33 billion yuan, down 0.052 billion yuan from 1Q24. 2) 2Q24 gross margin was 35.8%, +3.2pct year over year and +1.77pct month-on-month.

Raise profit forecasts and maintain a “buy” rating. We are optimistic about the optimization of the company's product structure and raised the 24-26 net profit forecast to 0.455/0.543/0.651 billion yuan (original value 0.376/0.496/0.614 billion yuan). The current market value corresponds to 24-year PE 29 times, maintaining a “buy” rating.

Risk warning: IGBT progress is lower than expected, SiC/GaN progress is lower than expected, and power device market sentiment continues.