Incident: Recently, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 0.873 billion yuan, +15.16% year over year; net profit to mother 0.218 billion yuan, +47.45% year over year; net profit after deducting non-return to mother 0.214 billion yuan, +55.21% year over year. The second quarter of 2024 achieved revenue of 0.502 billion yuan in a single quarter, +30.40% year over month; net profit to mother 0.118 billion yuan, +42.25% year on month, +17.50% month on month; net profit without return to mother 0.131 billion yuan, +75.96% year on year and +56.33% month on month.

Key points of investment:

24Q2 The company's performance recovered strongly, and gross margin continued to improve. Since the 2024 Spring Festival, the downstream market has gradually recovered, demand in emerging application areas has increased markedly, and the company's inventory has been digested at an accelerated pace. Some products are in short supply or continuous order addition. The company actively optimizes the product structure, market structure and customer structure, and responds to changes in customer demand in a timely manner, thereby driving the company's 24Q2 revenue and net profit to mother to mother rapidly increasing year-on-year and month-on-month, as well as continuous improvement in gross margin. The company's 24Q2 gross margin was 36.53%, up 6.85% year on year and 1.77% month on month, achieving month-on-month improvement for four consecutive quarters; 24Q2 net margin was 23.34%, up 2.16% year on year, down 3.26% month on month. 24H1 invested 40.4681 million yuan in R&D, accounting for 4.63% of revenue.

The downstream structure and customer structure are continuously optimized, and the automotive and AI server markets are developing at an accelerated pace. In terms of downstream applications, industrial automation accounted for 42% of revenue in the first half of 2024, pan-consumer accounting for 18%, photovoltaic energy storage accounting for 14%, automotive electronics accounting for 13%, AI computing power and communications accounting for 9%, and intelligent short-distance transportation accounting for 4%. 24H1 actively explores new downstream application fields, continuously increases investment in key emerging application fields such as new energy vehicles, photovoltaic energy storage, AI servers and data centers, and drones, and promotes strategic cooperation with customers to gain greater market share. In the automotive market, 24H1 increased the number of products supplied by more than 50% year-on-year, and various models were used in important three-electric power modules such as OBC and DC conversion; the company further expanded the scale of cooperation with BYD and achieved the introduction of more vehicle specification products; the company's vehicle specification products have been delivered in large quantities to nearly 100 Tier 1 manufacturers and terminal car companies, and introduced more than 10 new automobile customers. In the AI server market, the company's related products have now been finally used by leading overseas customers in the GPU field and have achieved mass sales, and more material numbers have been verified, and will grow even more rapidly in the future. In the photovoltaic energy storage market, 24H1 has achieved significant recovery, especially in the mixed grid and off-grid markets within 20KW, which is driving rapid growth in demand due to unstable power supply factors in Africa and other regions.

SGT-MOSFET and Trench-MOSFET products are rapidly released, and IGBT products 24H2 are expected to resume growth. In terms of product structure, in the first half of 2024, the company's SGT-MOSFET product revenue share increased from 33.95% of 23H1 to 41.44%, trench-MOSFET product revenue increased from 28.15% of 23H1 to 29.30%, IGBT product revenue fell from 24.07% of 23H1 to 16.20%, and SJ-MOSFET product revenue fell from 12.48% of 23H1 to 11.78%.

24H1's SGT-MOSFET products achieved revenue of 0.36 billion yuan, an increase of 40.29% over the previous year. Currently, some of the company's SGT-MOSFET products are in short supply. The company is actively expanding emerging markets, especially in AI computing power server applications. Many products are SGT series, and it is expected that 24H2 SGT products will continue to be sold. Benefiting from the recovery in demand for industrial control, pan-consumption, and automotive electronics, 24H1's Trench-MOSFET products achieved revenue of 0.255 billion, an increase of 19.64% over the previous year. The actual revenue of 24H1's SJ-MOSFET products was 0.102 billion yuan, an increase of 8.49% over the previous year; the company's latest fourth-generation SJ-MOSFET product series is complete and batch delivery has begun. 24H2 will increase promotion in the fields of home appliances, AI servers, automotive OBC, etc., which is expected to accelerate the growth of the company's SJ-MOSFET products. 24H1's IGBT achieved revenue of 0.141 billion yuan, a year-on-year decrease of 22.64%; demand for 24H2 photovoltaic IGBT products is expected to pick up further. At the same time, the volume of new high-current IGBT single tubes increases, and 24H2's IGBT sales are expected to grow month-on-month.

Profit forecasting and investment advice. The company also has four major product platforms: SGT-MOSFET, Trench-MOSFET, SJ-MOSFET, and IGBT, and continuously optimizes product structure, market structure and customer structure. The automotive and AI server markets are developing at an accelerated pace, SGT-MOSFET and Trench-MOSFET products are rapidly released, and IGBT product 24H2 is expected to resume growth. We expect the company's 24-26 revenue to be 1.878/2.274/2.732 billion yuan net. 24-26 The profit was 0.451/0.549/0.668 billion yuan, and the corresponding EPS was 1.09/1.32/1.61 yuan. Considering the gradual recovery of downstream demand, the company's overall competitiveness in the field of power devices and growth over the next few years was raised to a “buy” rating.

Risk warning: Industry competition increases risk; risk of downstream demand fluctuations; risk of new product development falling short of expectations.