2Q24 revenue, gross margin, and net profit to mother all achieved year-on-month increases. The company is mainly engaged in the development and sale of power devices, including IGBT, shielded gate MOSFET (SGT MOS), superjunction MOSFET (SJ MOS), and trench MOSFET (Trench MOS) product process platforms. 2Q24 achieved revenue of 0.5 billion yuan (YoY +30.4%, QoQ +35%), net profit of 0.118 billion yuan (YoY +42.25%, QoQ +17.5%), gross profit margin of 36.53% (YoY+6.85pct, QoQ+1.77pct). Cost, demand growth and product structure optimization led to 4 consecutive quarterly improvements in gross margin.

Products related to automotive and AI computing power are expanding at an accelerated pace, and industrial control continues to improve steadily. 1H24's industrial control revenue accounts for 42%, AI computing power and communication accounts for 9%, optical storage accounts for 17%, automotive electronics accounts for 13%, and photovoltaic energy storage accounts for 14%.

The number of the company's automotive electronics products increased by more than 50% year-on-year in the first half of '24, and various models were used in three-electric power modules such as OBC and DC conversion; the number of automotive products and automotive customers expanded at an accelerated pace. In the field of AI computing power, 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, and are expected to grow rapidly in the future. Furthermore, demand for photovoltaics is rapidly growing due to unstable power supply factors in Africa and other regions, and is gradually moving towards an improvement range.

SGT MOS, Trench MOS, and SJ MOS all achieved year-over-year growth. In the first half of '24, driven by demand for industrial control, pan-consumer, and automotive electronics, Trench MOS revenue of 0.255 billion (YoY +19.64%, accounting for 29.3%), SGT MOS revenue 0.36 billion (YoY +40.29%, accounting for 41.44%), and SJ MOS revenue of 0.102 billion (YoY +8.49%, accounting for 11.78%) all maintained year-on-year growth, and IGBT revenue was 0.141 billion billion (affected by photovoltaics) ( YoY -22.64%, accounting for 16.20%). As the main product, SGT MOS replaces the largest number of international manufacturers. In AI computing power server applications, many products are SGT series; the 4th generation of SJ MOS products has begun to be delivered in batches, and promotion in the fields of home appliances, AI servers, and automotive OBC will be further increased in the second half of the year.

The process platform continued to be upgraded, accounting for about 4.6% of R&D investment in the first half of the year. The on-resistance of the company's fourth-generation superjunction MOS (SJMOS) platform continues to be optimized. In the fifth-generation SJ MOS platform, multiple SGT MOS platforms have completed vehicle certification, using 85V third-generation SGT MOS for AI computing power and 48V systems for hybrid new energy vehicles as an example. Product performance continues to improve; 6 new products have been added to the SiC MOS series, and some have begun small-scale sales; GaN products continue to be developed.

Investment advice: We are optimistic about the expansion opportunities of the company's SGT MOS and other products and the long-term layout of products such as power ICs. Considering that the cost and product structure optimization effect is better than our previous expectations. Based on the degree of improvement in gross margin in the first half of the year, the 24-26 gross profit margin is expected to achieve net profit of 0.496/0.584/0.667 billion yuan (YoY +54%/+14%) (YoY +54%/+14%) (previous value: 0.417/0.483/0.52 billion in 24-26) yuan), corresponding to 24-26 PE was 27/23/20 times, respectively, maintaining the “superior to the market” rating.

Risk warning: downstream demand falls short of expectations, module progress falls short of expectations, etc.