Incident: On August 23, the company released its 2024 semi-annual report, achieving revenue of 2.372 billion yuan, +28.88% year over year; net profit to mother of 0.256 billion yuan, +11.43% year over year.

The company's Q2 revenue continued to grow rapidly in 2024, and profitability improved significantly from month to month:

The number of new energy customers accelerated, and the company's revenue continued to grow at a high rate. The company achieved revenue of 1.313 billion yuan in Q2 2024, +31.89% year over month, and maintained rapid year-on-month growth, mainly due to: 1) the company's core customer Chery's sales performance was excellent. Chery's sales volume in Q2 2024 was 0.5369 million units, +38.77% YoY and +5.58% month-on-month; 2) Renewable energy customers such as Wei Xiaoli, Zero Run, Xiaomi, and Tesla continued to generate revenue of 0.771 in 2024. billion yuan, +33.31% compared to the same period last year.

The company's profitability improved month-on-month, and its ability to control expenses was excellent. The company's comprehensive gross margin for Q2 2024 was 19.11%, -1.07 pct year on year and +2.13 pct month on month. The year-on-year decline was mainly due to lower gross margin in the early stages of the new plant and changes in customer structure. The sharp month-on-month improvement was mainly due to scale effects, etc. The company's expense ratio for the 2024 Q2 period was 12.01%, -0.42 pct year on year and -0.87 pct month on month. There were improvements, mainly due to cost dilution caused by scale growth. Among them, the increase in sales expenses was mainly due to mass production of new projects and the continuous increase in the output of customer-related projects.

The company's investment income has been growing steadily, and the profit growth rate of the headquarters is impressive. The company's return on investment in joint ventures in Q2 2024 was 0.076 billion yuan, +1.44% year over year and +35.92% month over month. After excluding the impact on the investment income of joint ventures, the company achieved net profit of 0.076 billion yuan in 2024 Q2, +20.45% year over year, and +56.71% month on month; the company headquarters's net interest rate for Q2 2024 was 5.75%, -0.55 pct year on year, and +1.20 pct month on month.

Multiple factors drive the company's future performance to continue to grow rapidly:

We believe that multiple core factors will drive the company's high future performance growth: 1) Continued expansion of new energy customers: The company has now successfully expanded new energy customers such as BYD, Chery New Energy, GAC New Energy, Tesla, NIO, Ideal, Xiaopeng, Xiaomi, Zeros, Nana, and Jihu. As the targeted projects of these customers gradually enter the mass production and climbing phase, the company's revenue is expected to maintain rapid growth. Furthermore, in order to ensure that the projects of these new energy customers can be put into operation on time, the company added three new bases in Hefei, Zhaoqing, and Anqing in 2024, and expanded production capacity in Wuhu, Shenyang, and Tianjin.

2) Breakthrough in the exterior parts business. The company has now successfully achieved a breakthrough from the interior business to the exterior business, and can provide customers with comprehensive service solutions for interior and exterior systems. Currently, the exterior business has entered BMW's supplier system, and it is expected to gradually introduce existing customers in the company's interior business in the future.

3) Overseas market expansion. In 2023, the company was invited by German OEMs such as Mercedes-Benz, BMW, and Volkswagen to demonstrate the smart cockpit “ix-2024” several times. The “ix-2024” won the Red Dot Award in 2024. The company used this as an opportunity to enter the German OEM supplier system, and will directly participate in the RFQ quotation in 2024. Furthermore, the company established a wholly-owned Hungarian subsidiary in May 2024 to further explore overseas markets and expand international business.

Investment advice: Maintain a “buy-A” rating. We expect the company's net profit from 2024 to 2026 to be 0.61/0.75/0.91 billion yuan respectively, corresponding to the current market value. PE is 7.2/5.9/4.9 times. We will give the company 10 times PE in 2024, corresponding to a target price of 16 yuan/share for 6 months.

Risk warning: large return on investment, risk of fluctuation, shortage of international teams.