Performance review
1H24 results are in line with our expectations
The company announced 1H24 results: revenue of 2.866 billion yuan, up 41.8% year on year; net profit to mother 0.096 billion yuan, corresponding to profit per share of 0.23 yuan, up 1.3% year on year, in line with our expectations.
Development trends
Second-quarter results remained high, and profitability was under pressure in the short term. Benefiting from strong demand from new energy core customers, the company's Q2 production and operation maintained a high growth trend, achieving the same and positive month-on-month revenue growth in a single quarter. The company achieved revenue of 1.57 billion yuan in a single quarter, up 52.1% year on year and 21.5% month on month; realized net profit to mother of 0.049 billion yuan, down 11.1% year on year and 4.3% month on month. With the gradual increase in the company's NEV business, the company's automobile business revenue grew rapidly. 1H24's auto parts revenue was 1.87 billion yuan, an increase of 68.8% over the previous year. Along with the rise in prices of upstream bulk materials such as 1H24 copper and aluminum, the company's gross margin declined slightly in Q2, and 1H24's overall gross margin was 10.2%. Currently, the price of upstream raw materials continues to decline, along with the company's high revenue growth rate and the decline in upstream material prices, we believe that the company's gross margin is expected to gradually recover and bring a boost to the company's performance.
Electric drive products continue to be rich, and customer expansion and technology iteration are developing at the same time. The penetration rate of new energy vehicles continues to increase, and driven by the upward trend in the industry, the company's NEV electric drive business is growing rapidly. As the company's core product in the new energy vehicle business, drive motors are being continuously iterated along with technological progress and product upgrades; the downstream vehicle market is developing electric drive systems in the direction of integration, high power, multiple motors, etc., and the bicycle supporting value of the company's drive motor business has risen to a maximum of 5,000 yuan. At the same time, rapid iteration of technologies such as distributed drives and oil-cooled motors has also improved the manufacturing process of fixed rotors and motor assemblies, driving up value. The company's products cover Huawei partner car companies such as Celis, Changan, Chery, and JAC; at the same time, the company supports mass production for leading OEMs and Tier 1 suppliers such as Geely, BYD, UMC, Dongfeng, and Schaeffler. We believe that the rapid iteration of electric drive system technology and the continuous expansion of the company's customers will lay a solid foundation for the rapid development of the company's new energy business.
Traditional businesses are developing steadily, and capacity expansion continues to accelerate. The company's traditional automobile and electric two-wheeler businesses are developing steadily, and actively laying out production bases in the Liangjiang New Area. The Liangjiang New Area has a Huawei automobile industry cluster and is close to the production bases of automobile companies such as Liangxiang and Chang'an. We believe that the expansion of production capacity in the Liangjiang New Area is expected to support the rapid development of the company's new energy business.
Profit forecasting and valuation
We kept our net profit forecast of 0.328 billion yuan unchanged for 2024 and introduced a net profit forecast of 0.436 billion yuan for 2025. The current price corresponds to the 2024/2025 price-earnings ratio of 14.5x/10.9x. Maintaining an outperforming industry rating and considering the downward shift in the valuation center of the segmented industry, we lowered our target price by 25% to 15.12 yuan, corresponding to the price-earnings ratio of 18.8 times/14.1 times in 2024/2025, with 29.6% upside compared to the current price.
risks
Vehicle market sales fell short of expectations, new energy business expansion fell short of expectations, and cost control fell short of expectations.