Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 5.446 billion yuan, +10.75% year over year; achieved net profit of 0.648 billion yuan, +27.38% year over year; realized net profit without deduction of 0.628 billion yuan, or +26.68% year over year. Looking at a single quarter, 2024Q2 achieved revenue of 2.937 billion yuan, +13.36% year over month; realized net profit of 0.339 billion yuan, +27.03% year on month, +10.02% month on month; realized net profit without return to mother 0.333 billion yuan, +26.34% year on year, +12.81% month on month.

The impact of price cuts is limited, and profitability is steady: in the first half of 2024, the company achieved a gross profit margin of 23.06%, +0.05pct year on year, a net profit margin of 11.87%, +1.43pct year on year; Q2 achieved a gross profit margin of 23.82%, +0.02pct year on year, +1.64pct month on month; net profit margin 11.51%, +1.16pct year on month. The company maintains good profit margins by maintaining good operating capabilities, cost control capabilities, etc., including innovation in manpower, equipment, efficiency, process, etc., and new technology.

The “13+3” global production capacity layout supports customers, and overseas bases are progressing smoothly. In the domestic market, the company has built 13 bases in Shenzhen, Shanghai, Jiangsu, Shaanxi, and Xiamen to achieve deep support with core customers such as Ningde Era, Everweft Lithium Energy, and Sunwoda. Overseas markets, the Hungarian and Swedish bases have been put into operation to achieve profits, and the German base is waiting for customers to expand. In May 2024, the company announced the construction of a production base with an output value of 70 million US dollars close to customers such as Ningde Times and Samsung. The overseas base layout helps the company further strengthen partnerships with domestic overseas enterprises and expand major international customers such as Northvolt and ACC.

Arrange the harmonic reducer to open the second growth curve. Focusing on precision components and robots, the company joined forces with Mengli and Mengying. Early work continues and progresses smoothly. Relying on the company's current production base and customer resources, the joint venture is expected to further develop the market, and the robotics business is expected to contribute more profits to the company and open up a second growth space for the company.

Investment advice: We expect the company to achieve operating income of 12.695/15.301/18.147 billion yuan and net profit to mother of 1.407/1.652/1.901 billion yuan in 2024-2026, corresponding PE of 13.67/11.64/10.12 times, maintaining the “gain” rating.

Risk warning: risk of convertible debt-for-equity swaps; increased risk of market competition; risk of high customer concentration; risk of exchange rate fluctuations.