The company released its 2024 semi-annual report, and achieved high growth in both operating income and net profit in the first half of the year. In the first half of 2024, the company achieved revenue of 4.193 billion yuan, +46.23% year on year, net profit of 0.287 billion yuan, +57.89% year on year, gross margin of 21.76%, -0.47pct year on year, net interest rate 6.90%, +0.48pct year on year. The company achieved high year-on-year growth in both annual revenue and net profit in the first half of 2024, and a significant year-on-year increase in net profit. By product, automotive electronics achieved revenue of 3.071 billion yuan in the first half of the year, an increase of 65.41% over the same period last year; precision die-casting achieved revenue of 0.914 billion yuan, an increase of 23.55% over the same period last year.

2024Q2's performance has been improving steadily. On a quarterly basis, 2024Q2 achieved revenue of 2.203 billion yuan, +41.89% YoY, +10.64% month-on-month, net profit of 0.145 billion yuan, +38.83% YoY, +1.66% month-on-month; gross margin was 21.94%, -0.2pct yoy, +0.38pct month-on-month, net interest rate was 6.57%, -0.15pct, and the company's 24Q2 performance increased steadily.

Order development has achieved remarkable results, and new breakthroughs have been made in new product development. In terms of orders, in the first half of 2024, the company made remarkable progress in developing orders for its automotive electronics business. Major products such as cockpit domain control, HUD, screen display, vehicle wireless charging, and in-car video entertainment systems continued to receive many designated projects, and the order amount increased dramatically; the customer base continued to expand, and joint ventures and international car company customer projects increased, breaking through SAIC Audi and gaining access to new customer projects such as Stellantis Group, Changan Mazda, Changan Ford, Beijing Hyundai, and Daimler., Chery, Guangzhou Automobile, BAIC New projects such as Cyrus, Krypton, NIO, Xiaopeng, and BYD; the precision die-casting business saw a significant increase in orders for components such as new energy three-power systems, intelligent driving systems, and automotive high-speed high-frequency and 3C connectors; received new projects from ZF, Bosch, BorgWarner, BYD, Weipai, UMC, Freya (HELLA), Flextronics, Everweft Lithium, Tyco, Morse, Amphenol and other important customers.

In terms of technology and product development, in the first half of 2024, the company invested 0.373 billion yuan in R&D, an increase of 25.57% over the previous year, accounting for 8.90% of revenue; at the same time, the company rapidly iterated automotive electronics and technology and launched innovative multi-functional integrated products, leading industry technology trends, such as the company launched integrated cabin domain control products based on Qualcomm 8255 chips; and simultaneously developed cabin driving integration and central computing unit products based on Qualcomm 8775 chips, which are expected to be launched in the second half of 2024. We believe that the company's acquisition of new orders and continuous implementation of new product development are expected to help the company grow steadily.

Profit forecasting and investment advice. We expect the company's net profit to be 0.66/0.877/1.148 billion yuan in 2024-2026, respectively, and EPS of 1.26/1.67/2.19 yuan, respectively. Referring to the valuation level of companies in the same industry, considering the high growth potential of innovative automotive electronics products such as HUD, we will give them 21-25 times PE in 2024, corresponding to a reasonable value range of 26.46-31.5 yuan, maintaining the “superior to the market” rating.

Risk warning. The automobile industry is declining; raw material prices fluctuate greatly; the risk of falling electronic product prices; the progress of new customer projects falls short of expectations; new business technology research and development and customer development fall short of expectations.