Event: In the first half of 2024, the company achieved operating income of 12.091 billion yuan (YoY +36.50%) and net profit to mother of 1.367 billion yuan (YoY +792.79%). 2Q24 achieved revenue of 6.448 billion yuan (YoY +42.55%, QoQ +14.24%); net profit to mother of 0.809 billion yuan. The company actively promoted product structure optimization and supply chain structure optimization, and promoted the gradual recovery of the company's product gross margin. 2Q24 increased to 30.2%, an increase of 2.2 pcts over the previous month.

Business split: In the company's semiconductor design and sales business, the image sensor solution business achieved sales revenue of 9.312 billion yuan, accounting for 77.15%, an increase of 49.90%; the company's display solutions business achieved sales revenue of 0.472 billion yuan, accounting for 3.91%, a year-on-year decrease of 28.57%; the company's analog solutions business achieved sales revenue of 0.634 billion yuan, accounting for 5.25%, an increase of 24.67% year on year. The company's semiconductor agency sales business achieved revenue of 1.633 billion yuan, accounting for 13.53%, an increase of 13.40% over the previous year.

CIS: The share of mobile phones has increased, and the scale of automotive electronics shipments continues to rise. The company's image sensor business achieved revenue of about 4.868 billion yuan from the smartphone market, an increase of 78.51% over the previous year. The company actively promoted product structure optimization and supply chain structure optimization, and achieved an increase in product portfolio competitiveness. The company's 50 million pixel series products with different pixel sizes have achieved a significant increase in the share of smartphone main camera applications, providing continuous momentum for the steady increase in the value and profitability of the company's products. Revenue from the automobile market reached about 2.914 billion yuan, an increase of 53.06% over the previous year, and the market share continued to increase.

The company covers a wide range of automotive applications with advanced and compact automotive CIS solutions. The company's image sensor business achieved revenue of about 0.708 billion yuan from the security market, a year-on-year decrease of 25.02%. The company's image sensor business came from revenue of about 0.336 billion yuan in the IoT/emerging market, an increase of about 77.62% over the same period of the previous year, and from the medical market revenue of about 0.264 billion yuan, an increase of 27.42% over the same period last year. Furthermore, the company achieved significant breakthroughs in machine vision application solutions. With outstanding performance advantages brought by global exposure technology, the company's machine vision products were highly recognized by customers.

Outlook 24/25: We believe that the high-end image sensor represented by the company's OV50H is widely used in mainstream domestic high-end smartphone rear camera sensor solutions with its excellent performance, and is gradually replacing similar products from overseas competitors, and future growth can be expected; the verification and introduction of new automotive CIS products and multiple products such as CAN/LIN, SerDes, PMIC, and SBC will contribute new growth points to the growth of automotive electronics.

Profit forecasts and investment recommendations. We believe that as the world's leading CIS chip leader, the company has a certain market share in the mobile CIS market. The automotive CIS and security business continues to grow at a high rate, and is expected to form a second growth curve in the future. At the same time, the platform-based layout structures the third curve, and the ceiling is expected to open up. We expect Weil's 2024-2026 EPS to be 2.41, 3.18, and 4.22 yuan, respectively. Considering the valuation level of comparable companies and the growth of the regional market where the company is located, the 24-year PE valuation range is 45-50x, corresponding to a reasonable value range of 108.45-120.50 yuan, maintaining the “superior to the market” rating.

Risk warning. The development of new products may require significant R&D support, there is a shortage of production capacity in foundries, and market competition is intensifying.