Incident: The company released its 2024 semi-annual report. In 2024, H1 achieved revenue of 1.272 billion yuan, a year-on-year increase of 10.00%; realized net profit to mother of 0.037 billion yuan, an increase of 134.16% over the previous year; deducted non-net profit of 0.016 billion yuan, an increase of 110.51% year on year. In 2024, Q2 achieved revenue of 0.715 billion yuan, up 2.64% year on year and 28.57% month on month; realized net profit of 0.042 billion yuan, up 840.77% year on year, up 852.13% month on month; realized deducted non-net profit of 0.026 billion yuan, up 196.58% year on year, up 344.00% year on month.
24H1's performance increased significantly, and Q2 profitability increased year-on-month: In the first half of 2024, thanks to the recovery in overall market demand in the LED industry and strong growth in market segments such as Mini/Micro LED, the company actively promoted management changes and lean management, and the capacity utilization rate reached 97.39%. In 2024, H1 achieved a sharp year-on-year loss, and Q2 profitability continued to increase. In '24, H1's gross margin was 14.74%, +7.21pcts year on year; net margin was 2.90%, +12.23pcts year on year. The company's gross margin in Q2 '24 was 15.32%, +5.71 pcts year on year, +1.33 pcts month on month; net margin was 5.94%, +6.76pcts year on year, +6.95pcts month on month. In terms of expenses, the sales, management, R&D, and financial expenses of H1 in 24 were 1.09%/6.05%/5.52%/2.05%, respectively, +0.15/+1.00/+0.95/-1.16pcts compared with the same period.
Benefiting from the recovery in LED market demand, the core business grew rapidly: in the first half of 2024, in the display field, the company continued to upgrade products through internal R&D and external cooperation. The overall performance of the product improved by more than 6% compared to the end of 2023. RGB directly showed a 38% year-on-year increase in overall revenue. Furthermore, in the field of Mini RGB displays, the company accurately captures market trends and cooperates more closely with downstream customers. Mini RGB products have contributed greatly to performance growth, and revenue increased 249% year over year. In the field of lighting, the company has successfully served many domestic listed companies and overseas customers, and various high-light efficiency products have been put into large-scale production and shipment to clients. In the first half of 2024, revenue in the lighting sector grew steadily. Among them, revenue from high-efficiency lighting products increased by more than 30% year on year. According to TrendForce's latest LED industry report, the global LED market will have an opportunity to resume growth in 2024. The output value is estimated to reach 13 billion US dollars, an annual increase of 3%. The company's performance is expected to continue to benefit from the recovery in LED market demand and continuous growth.
The high-end trend is driving the growth of the LED industry, and commercial aerospace opens up room for performance growth: in the first half of 2024, the company's new business revenue increased 32% year over year. Among them, in the field of backlight products, demand for backlight chip products increased as the penetration rate of downstream MiniLED TVs increased. In the first half of 2024, the company's backlight chip revenue increased 178% year-on-year. In the field of solar cells, thanks to the development of the commercial aerospace industry, the number of low-orbit satellite launches is expected to continue to rise. Demand for the company's products is strong. Shipments of H1 gallium arsenide solar cell epitaxial wafer products increased 39% year-on-year in 24. According to GGII, the global mini LED market will reach 5.3 billion US dollars in 2025, with a compound annual growth rate of more than 85%; by 2025, the global micro LED market will exceed 3.5 billion US dollars, and the global micro LED market is expected to break the 10 billion dollar mark in 2027. According to Taber think tank estimates, the size of China's commercial space market will reach 2.8 trillion yuan in 2025. In 2030, China's commercial space market will be close to 10 trillion yuan. As Mini/Micro LED technology continues to penetrate and various low-orbit satellite internet constellations gradually begin to be officially built, demand for LED chips and gallium arsenide solar cell epitaxial films is expected to increase further, and the company is expected to make full use of its technological leadership and product competitive advantage to further open up room for performance growth.
Maintaining a “buy” rating: In the first half of 2024, the global economy recovered and was widely used in display, lighting, etc., and demand for LED products gradually increased, driving the continuous penetration of Mini/Micro LED technology. At the same time, under the active impetus of policies, private rocket companies actively participated in the layout of satellite constellations, increasing the company's capacity utilization rate and product shipments. In addition, the company is also committed to product structure transformation and actively developing the second growth curve. The revenue share of middle and high-end products continues to rise, and the company's performance has increased significantly. Considering that 24Q1 is in the early stages of LED industry recovery, the company's performance in a single quarter fell short of expectations, so the company's profit forecast was lowered. The company's net profit for 2024-2026 is estimated to be 0.122 billion yuan, 0.158 billion yuan, 0.206 billion yuan, EPS 0.13 yuan, 0.17 yuan, 0.23 yuan, PE 46X, 35X, and 27X respectively.
Risk warning: Mini/microLED penetration rate falls short of expectations, number of low-orbit satellite launches falls short of expectations, risk of technological innovation, risk of market competition.