Incident: From January to June 2024, the company achieved revenue of 4.193 billion yuan, an increase of 46.23% over the same period of the previous year. Among them, automotive electronics achieved revenue of 3.071 billion yuan, 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. Net profit attributable to shareholders of listed companies was 0.287 billion yuan, an increase of 57.89% over the same period last year, and realized net profit of 0.277 billion yuan after deduction, an increase of 64.43% over the same period last year.

The company's automotive electronics & precision die-casting business is growing rapidly, and profit margins are expected to increase further. We believe that the main growth in the company's automotive electronics business comes from products such as cockpit domain control, displays, HUD, etc.; the company's automotive electronics business had a gross profit margin of 20.71% from January to June 2024, -1.17pcts year on year. We believe it is mainly due to changes in product structure and many new mass production projects. The company's precision die-casting business had a gross profit margin of 25.73% from January to June 2024, -0.35pcts year on year. We believe this is mainly due to increased amortization of fixed assets due to new production capacity, and gross margin is expected to remain stable as capacity utilization increases.

The company's order development has progressed significantly, and customers at home and abroad have successfully broken through. In the automotive electronics business, major products such as cockpit domain control, HUD, screen display, in-vehicle wireless charging, and in-vehicle audio-visual entertainment systems continue to receive many fixed projects, breaking through SAIC Audi and receiving targets for multiple categories of projects, receiving new projects from customers such as Stellantis, Changan Mazda, Changan Ford, Beijing Hyundai, Daimler, etc., and new projects from domestic car companies including Great Wall, Changan, Chery, GAC, BAIC, Celis, Gekrypton, NIO, Xiaopeng, and BYD. In the precision die-casting business, the company received new projects from ZF, Bosch, BorgWarner, BYD, Weipai, UMC, Freya (HELLA), Flextronics, Everweft Lithium, Tyco, Morse, Amphenol and other important customers. The company has launched integrated cabin and parking domain control products, and is developing cross-domain integrated products such as integrated cabin driving and central computing units to continuously enhance the advantages of automotive electronic system integration.

Profit forecast: We believe that with the gradual mass production of the company's smart driving domain control and integrated cabin driving domain control products, the company's cockpit+smart driving business is expected to resonate upward. We expect the company's 2024-2026 revenue to be 9.239, 11.444, and 14.76 billion yuan, and net profit to mother of 0.65, 0.87, and 1.12 billion yuan respectively. The current stock prices correspond to 18.7x, 14x, and 10.9x PE, respectively, to maintain a “buy” rating.

Risk warning: Market competition intensifies; customer model sales fall short of expectations; new business development falls short of expectations.