Matters:
The company released its 2024 mid-year report. Revenue for the first half of the year was 1.53 billion yuan, -12% year on year, and net profit to mother was 0.219 billion yuan, or -12% year over year.
Commentary:
Revenue and performance declined as major customers dragged down. The company achieved revenue of 0.75 billion yuan, -17% YoY, and -4% month-on-month, corresponding to major customer T's production of 0.191 million vehicles, -22%/-14%, ideal wholesale 0.109 million vehicles, +25%/+35%, NIO Wholesale +87%/+90% YoY, Zero-Run +55%/+59%. New autonomous forces partially hedge T's reduction. Some customers' new cars are still in the upper half of the year, and are expected to bring even greater increases in the second half of the year. Among them, export sales in the first half of the year were 0.074 billion yuan, or -52% year-on-year, which is estimated to be related to the pace of overseas customers picking up goods.
1H24's stamping and integrated die-casting business revenue was 1.39 billion yuan, -13% YoY, gross profit margin 17.6%, YoY -3.6PP; stamping die business revenue was 0.048 billion, -7% YoY, gross profit margin 14.8%, YoY +5.1PP.
Performance and revenue declined, in line with expectations. In 2Q24, the company achieved net profit of 0.104 billion yuan, -26%/-9% year-on-month, deducted non-net profit of 0.104 billion yuan, and -24%/-6% year-on-month, specifically:
1) Gross profit margin: 21.8%, year-on-month ratio -4.9PP/-1.4PP. The decline in volume had an impact on the utilization rate and profit level. In addition, external factors 2Q Shanghai aluminum average price +11%/+8% YoY; 2) Expense rate: three rate 6.7%, +0.2PP/+0.6PP, of which R&D rate was 3.0% and -1.2PP/+0.8PP, the management rate was 3.7%, +0.7PP/-0.1PP compared to the same period, and the financial rate was -0.2% and the same as +0.7PP compared to the same period.
The invisible king of stamping, the new star of integrated die-casting, multiple layouts support medium- to long-term development:
1) In terms of stamping, the company started with supporting SAIC automobile companies, obtained an ideal target in 2018, became a Tesla supplier in 2019, and carried out a new energy transformation earlier. In this segment, the company's per capita revenue in 2023 is close to 3 million yuan/person, which is significantly higher than its peers (0.8-1 million yuan/person). On the one hand, it benefits from the high unit price of the product, and on the other hand, it also shows that the company is superior to the level of automation in the industry. The high capacity utilization rate and high automation rate have stabilized the company's gross margin at 23%-25%. It is in the leading tier of the industry. The cost ratio for the period is about 6%, which is 2-3 PP lower than the peer average. Ultimately, the overall profitability of Duoli is significantly superior to that of its peers.
2) In terms of integrated die casting, the company's current main products include steel and aluminum stamped body structural parts. The understanding of vehicle design and structure will be superior to most die-casting peers who have no experience in structural parts production, which will help improve the yield and efficiency of the company's integrated die-casting. In addition, in the field of traditional medium and small die-casting machines, imported equipment such as Swiss Bühler and Japan's Toshiba has been recognized by the industry in terms of stability and yield of production products. Dolly selects imported Bühler equipment for large-scale die-casting machines and continuous optimization of the die-casting process with customer order support, which is expected to achieve a better breakthrough in the field of integrated die-casting.
Investment advice: The company's 2Q performance declined from month to month, but overall it was consistent with changes in revenue, indicating that operating performance did not fluctuate much. According to the 2024 mid-year report, we adjusted the company's 2024-2025 net profit forecast from 0.62 billion yuan and 0.71 billion yuan to 0.5 billion yuan, and introduced the 2026 net profit forecast of 0.7 billion yuan, corresponding to growth rates of +1%, +19%, and +17%, corresponding to the current PE 10.0 times, 8.5 times, and 7.2 times. The company was dragged down by the performance of major customers in the first half of the year, but some customers are still in the early stages of new cars in the first half of the year, and the second half of the year is expected to bring even greater growth. Based on the industry and company's historical valuations, we gave the company a target PE of 15 times for 2024 and a target price of 31.6 yuan, maintaining a “recommended” rating.
Risk warning: The development of integrated die-casting technology and industry demand fell short of expectations, the expansion of new integrated die-casting customers fell short of expectations, overseas demand and domestic consumption fell short of expectations, and the increase in raw material prices exceeded expectations.
