Incident: The company released its 2024 interim report, achieving revenue of 1.12 billion yuan, +15.3% year-on-year, and net profit to mother of 0.16 billion yuan, or +74.9% year-on-year. Looking at the single quarter of the split, Q2 achieved revenue of 0.63 billion yuan, +14.9% year-on-month, and realized net profit of 0.08 billion yuan to mother, +54.2% year-on-year, and +4.6% month-on-month.

Successfully entered the new energy circuit, and the customer structure was optimized. Since undertaking the Ideal ONE project in 2020, the company has officially entered the new energy circuit. Currently, it provides support for various NEV models such as SAIC Volkswagen, SAIC GM, and SAIC passenger cars, and provides support for new energy models from automakers such as Tesla, Ideal Auto, Xiaomi, Dongfeng Rantu, and Zhiji Auto. The customer structure has been optimized to a certain extent. According to the company's 2023 report, the company's new energy sales reached 30% of total sales in 2023, and this ratio is expected to exceed 50% in 2024.

The performance of the electroplating business is impressive, and the subsequent performance is worth looking forward to. In 2022, the company acquired Wuxi Kaixiang to expand the electroplating business to provide selective precision electroplating services for some components (mainly casters, internal support rods, iron cores, etc.) in high-pressure injectors and high-pressure fuel pumps for automobile engines. On the customer side, Wuxi Kaixiang is the only domestic supplier of United Electronics High Voltage Electrojet chrome plating. It is also one of the important global production capacity supply bases of Bosch in Germany in this field. 2024H1 Wuxi Kaixiang's performance showed a rapid growth trend, achieving revenue of 0.09 billion yuan, a year-on-year increase of 52.1%, and net profit of 0.06 billion yuan, an increase of 69.6% over the previous year. The profit growth rate was higher than the revenue growth rate.

In a horizontal comparison, 2024H1 Wuxi Kaixiang's net profit level of 0.06 billion yuan far exceeds that of other subsidiaries that have begun to contribute profits. In the future, along with the rapid growth of hybrid models, the electroplating business is expected to continue to contribute more.

Internal and external training: control internal fees+strengthen external supporting capabilities. The company's fee control effect was remarkable. The 24H1 net interest rate was 14.2%, +4.8pp compared to the previous year. On the cost side, 24H1's sales expense ratio was 0.2%, +0.05pp; the management expense ratio was 4.4%, -0.9pp; and the R&D expense ratio was 2.9%, +0.1pp. In August 2024, the company disclosed that its wholly-owned subsidiary in Langfang obtained the “Enterprise Investment Project Filing Information” notice. The total investment of the project was 0.648 billion yuan. The project built a new production building and related supporting facilities, purchased automated stamping, welding and testing equipment, and produced car body parts. After completion, the project is expected to produce 0.5 million sets of auto parts per year.

The expansion of the Langfang factory will help break through its own production capacity bottlenecks and enhance customer stickiness.

Profit forecasting and investment advice. We expect the compound growth rate of net profit to be 24.2% over the next 3 years, giving the company 13 times PE in 2024, with a target price of 18.46 yuan. First coverage, giving a “buy” rating.

Risk warning: market competition risk, raw material price fluctuation risk, risk of downstream customer sales falling short of expectations, risk of policy adjustments, trade friction risk, etc.