Incident: On August 23, the company released its 2024 semi-annual report. 24H1 achieved operating income of 2.372 billion yuan, +28.88% year-on-year; realized net profit of 0.256 billion yuan, +11.43% year-on-year, and realized net profit without deduction of 0.247 billion yuan, or +15.83% year-on-year. Among them, 2024Q2 achieved revenue of 1.313 billion yuan, +31.89%/+24.02% year-on-month; realized net profit of 0.152 billion yuan, +10.08%/+45.52% year-on-month, respectively; realized net profit of 0.14 billion yuan without return to mother, +2.22%/+29.64% year-on-month, respectively.

The share of revenue from the new energy business continued to rise, and the return on investment increased significantly over the same period last year. New energy business: 2024H1. The company's new energy sales revenue accounted for 32.5% of total sales revenue, an increase of 1.09pp over the previous year. In terms of new energy customers, the company has established good partnerships with Mercedes-Benz EQB, BMW EV, Volkswagen MEB, BYD, Tesla, Ideal, Xiaopeng, Nana, Zero Run, Extreme Fox, Chery New Energy, Xiaomi, British Jaguar Land Rover, and North American ZOOX. In terms of investment income: The company's investment income mainly comes from participating companies Changchun Peger (the company holds 49.999%), FAW Fusheng (the company holds 30% of the shares), Changshu Antolin (the company holds 40% of the shares), and Changchun Antolin (the company holds 40% of the shares). 2024H1 Changshu Auto Accessories achieved investment income of 0.133 billion yuan, up 24.3% year-on-year, accounting for 52.2% of total profit in the first half of the year.

The layout of the production base has been improved, and the digital system has improved quality and efficiency. The company has perfected the layout of four sectors and 15 bases to achieve a two-way linkage service mechanism between the regional sector and the company headquarters. It has the advantages of timely response, quick communication and on-time delivery, and has formed a good market reputation. In the first half of 2024, the company added additional bases in Zhaoqing, Hefei and Anqing, and further expanded production capacity in Wuhu, Shenyang and Tianjin. In terms of digital system construction, the company's SAP system has completed the HAN upgrade, the new SAP base has completed its independent launch, continued to improve the interface with three-dimensional library systems, WMS and other systems, and develop data analysis systems. Production efficiency and product quality are expected to continue to be optimized.

The smart cockpit continues to iterate, boosting the expansion of overseas markets. The company began setting up a smart cockpit R&D team in 2015, and launched the first-generation smart cockpit “Enjoy the Future” prototype in 2021. In the same year, it cooperated with FAW Fusheng and Huawei BU to jointly promote the creation of a healthy smart cockpit. In 2022, we co-developed Starlight Immersive Ambient Light with Huawei and Botai. In 2023, Changshu Auto Accessories participated in the Guangzhou Auto Show with the third-generation smart cockpit “ix-2024”. In 2024, the smart cockpit “ix-2024” won the “Automobile and Motorcycle” category design concept award at the Red Dot Award, one of the world's top industrial design awards. The company used this as an opportunity to enter the German OEM supplier system and will directly participate in RFQ quotes in 2024, which is expected to help the company open up related business space in overseas markets.

Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 1.58/1.91/2.28 yuan, and the three-year compound annual growth rate of net profit is 16.6%. With the rapid growth in revenue from the new energy business of the company headquarters, the smart cockpit and lightweight business boosts the company's ASP, and the performance is expected to continue to improve. The company will be given 13 times PE in 2024, corresponding to a target price of 20.54 yuan, maintaining a “buy” rating.

Risk warning: Risks such as customer expansion falling short of expectations, fluctuating raw material prices, large and fluctuating investment returns, falling short of expectations in smart cockpit business development, and falling short of expectations in overseas markets.