In 2Q24, the company's revenue increased 17% year over year, for 6 consecutive quarters of month-on-month growth. 2Q24's product shipments continued to increase, achieving revenue of 2.81 billion yuan (YoY +17%, QoQ +14%). Due to factors such as discrete device operation rate and product price, net profit after deducting non-return net profit of 0.007 billion yuan (YoY -113.6%, QoQ -105.0%), gross profit margin 17.96% (YOY-4.55ct, QoQ-4.14pct); in addition, due to the company's holding of Yuneng Technology and Anlu Technology shares, changes in fair value affected the company's net profit to parent.

1H24 integrated circuits increased 29% year over year, and shipments of IPM modules and circuit products accelerated. 1H24's integrated circuit revenue achieved 2.035 billion yuan (YoY +29%), gross profit margin of 31.12% (YoY+0.42pct), the dominant product IPM module revenue was 1.413 billion yuan (YoY +50%), and shipments in the white electronics sector exceeded 83 million units, an increase of 56% year on year; MEMS revenue was 0.115 billion yuan, due to a short-term decline in sensor prices, and the company's accelerometer domestic market share reached 8% year-on-year. At 20%-30%, IMU received batch orders from many domestic smartphone manufacturers, and shipments are expected to increase dramatically in the second half of the year; in addition, 32-bit MCU revenue increased by about 28% year-on-year, in line with industrial and white electronics customers. Silantech's 12-inch production line will build production capacity for automotive-grade BCD circuits, and the additional production capacity is expected to be released in 1Q25.

1H24 discrete device revenue increased 4% year over year, and automotive products advanced rapidly. The revenue of 1H24 discrete devices was 2.399 billion yuan (YoY +4%), with a gross profit margin of 14.51% (YoY-9.42pct). Despite the decline in gross margin due to product prices and production line utilization, the product structure continued to be optimized: the company's IGBT and SiC revenue reached 0.783 billion yuan, an increase of more than 30% over the previous year. The company's IGBT main drive modules were delivered in batches at BYD, Geely, Zero Run, GAC, Huichuan, Dongfeng, Changan, etc. Products are shipped in large quantities.

Silicon carbide main drive modules have been delivered in batches, and silicon carbide production capacity continues to be released. Silanming Gallium's 6-inch SiC MOS chip production capacity is 6000 pieces/month. The production capacity is expected to reach 9,000 pieces/month by the end of the third quarter, and the production capacity will reach 12000 pieces/month by the end of '24. The second-generation SiC MOSFET chip automotive main drive module based on self-development has been verified by customers such as Geely and Huichuan, and mass production and delivery have begun; the development of the third-generation plane-gate SiC MOSFET technology has been initially completed.

Investment advice: Since the company holds shares of Yuneng Technology and Anlu Technology, price fluctuations have a big impact on the company's net profit due to the company's net profit, 1H24's fair value change was -0.162 billion yuan; in addition, due to falling prices of discrete device products, 1H24 gross margin was lower than our previous expectations; combined with the current gross profit margin of the company's discrete device products, the average gross profit margin is expected to be 0.088/0.352/0.611 billion yuan (previous value 0.318/0.547/0.729) billion yuan), corresponding to PB 2.7/2.6/2.5x, maintaining the “superior to the market” rating.

Risk warning: Silicon carbide expansion falls short of expectations, and downstream demand falls short of expectations.