Revenue for the second quarter was under pressure, and profitability increased. In 2024H1, the company achieved revenue of 2.14 billion/ -12.7%, net profit due to mother 0.18 billion/ +8.1%, after deducting non-attributable net profit of 0.17 billion/ +1.8%. Among them, Q2 revenue was 1.06 billion/ -21.6%, net profit attributable to mother 0.103 billion/ +4.7%, and net profit not attributable to mother was 0.097 billion/ -11.3%.

Non-recurring profit and loss mainly comes from government subsidies. The company took the initiative to adjust the revenue structure in Q2 to improve the quality of operations. Although revenue declined, net profit performance was basically stable, and profitability improved markedly.

Lighting export sentiment declined, and revenue declined due to the company's restructuring. Q2 The year-on-year growth rate of China's lighting product exports declined. According to data from the General Administration of Customs, the export value of 2024H1 China's lamps and lighting devices and parts increased 3.4% year on year to 20.6 billion US dollars, of which Q1/Q2 was +9.6%/-1.6% respectively. The revenue growth rate of the company's main general lighting business is expected to be close to the company's overall revenue growth rate. The decline in Q2 is mainly due to the company actively adjusting its product structure and market strategy, actively increasing the sales share of high-value-added lighting products, and actively reducing the market business size in high-risk regions. After entering the second half of the year, China's lighting product exports and the company's revenue base gradually declined. It is expected that 2024H2's general lighting revenue will rise steadily.

The automotive business was under pressure in the short term, and the new fixed-point performance was outstanding. The company's revenue for Debon Automotive Lighting H1, which mainly includes in-vehicle controllers, increased 5% year on year to 0.17 billion, while Shanghai Liangqin's revenue, which mainly focuses on structural components for car lights, fell 27.1% year on year to 0.11 billion, and total revenue fell 10.6% to 0.29 billion yuan. The net interest rate of the company's automotive business fell 3.3 pct to 1.4% year on year, which is expected to be related to the company's large new fixed investment. The company added a target of nearly 0.9 billion yuan for H1 projects (1 billion yuan + for the full year of 2023), and added orders from major customers such as NIO, Valeo, Yanfeng Piou, and Elios. It is expected that with the gradual transformation of the company's early-stage targeted projects into revenue, the company's automotive business is expected to return to a relatively rapid growth channel.

Expense investment increased, and gross profit increased. The company's Q2 gross margin increased 4.2pct to 21.5% year-on-year. It is expected that the company will actively adjust its business structure and reduce low-profit orders. The company's cost investment increased. The Q2 R&D/management/sales expenses ratio was +1.1/+1.4/+1.3pct to 4.2%/4.4%/4.5% year on year, respectively; the financial expense ratio was -3.2%, the same as the previous year. Q2 The company's fair value change losses and asset impairment losses have been reduced, making a positive contribution to net interest rates. Under the combined influence, the company's Q2 net profit margin was +2.4pct to 9.8% year-on-year, and profits increased relatively well under active business restructuring.

Risk warning: Industry competition intensifies; automotive customer expansion falls short of expectations; industry demand recovery falls short of expectations.

Investment advice: Lower the profit forecast and maintain the “better than the market” rating. Taking into account the company's active adjustment of the business structure and the export format of lighting products, the company's net profit for 2024-2026 is expected to be 0.4/0.45/0.49 billion (previous value 0.43/0.49/0.55 billion), +8%/+8% year-on-year, corresponding PE is 15/13/12 times, and maintain the “better than the market” rating.