The company's 2Q24 revenue, gross margin, and net profit after deduction of non-return to mother all achieved a month-on-month increase. The company's main products are mainly divided into three major segments: materials (monocrystalline silicon rods, silicon wafers, epitaxial wafers), wafer segments (5 inch, 6 inch, 8 inch and other chips), and packaging devices (MOSFET, IGBT, SiC series products, rectifier devices, protection devices, small signals and other product series, etc.), picked up as demand picked up, and the company's 2Q24 revenue was 1.54 billion yuan (YoY +17.0%, QoQ +15.8%), net profit of 0.234 billion yuan (YoY +2.2%) 1%, QoQ +24.66%), gross profit margin 31.32% (YoY+1.80pct, QoQ+3.65pct).

The automobile share penetrates the processing industry, and the recovery in consumer demand drives revenue growth, and the cost side is gradually optimized. 1H24's share in domestic automotive electronics applications has penetrated, demand is strong on the consumer electronics application side, and the industrial market is gradually improving. As a result, with the moderate downstream recovery, the company's semiconductor device revenue increased 11.3% year-on-year in the first half of the year. In terms of cost optimization, the company's direct labor efficiency increased 11% year on year, comprehensive equipment utilization rate increased 5.8% year on year, and the total cost reduction amount of standard costs and failure costs exceeded 0.18 billion yuan.

1H24's overseas revenue was 0.62 billion yuan (21.5%), and gross margin reached 45.62%. In the second quarter, with the end of the inventory removal phase in overseas markets, overseas sales revenue increased sequentially, driving the company's overall gross profit level to rise accordingly. In the future, as major overseas manufacturers gradually withdraw from some medium- and low-voltage product markets, the company's overseas business is expected to benefit. Unlike domestic business, entering overseas markets requires brands and channels. After the company acquired the MCC brand in 15 years, the overseas business grew at an accelerated pace. On this basis, the company's Vietnam sealing and testing plant is being built at an accelerated pace, providing a guarantee for a further increase in market share in the future.

1H24's R&D investment increased 19% year over year, and the iteration of MOSFET, IGBT and silicon carbide products accelerated.

The company's H2 business key product MOSFET continues to be upgraded: multiple platforms of 8-inch and 12-inch SGTMOSFET chips based on the Fabless model have been accelerated and the serialization is gradually comprehensive; H3 business (IGBT\ SiC) products are currently mainly Fabless, and the product types are constantly being expanded: the company's NEV PTC uses 1200V series single tubes to be delivered to car enterprise customers in large quantities; photovoltaic IGBT modules are put on the market; 750V/820AIGBT modules have been developed for new energy vehicle controllers, 1200V/2MΩ three-phase bridge SiC module.

Investment advice: We are optimistic about the company's domestic and international dual cycle business model. Considering the increase in average gross margin brought about by cost-side optimization and overseas gross margin, the 24-26 forecast was raised. The company is expected to achieve net profit of 0.99/1.16/1.42 billion yuan (previous value: 0.93/1.03/1.18 billion yuan) in 24-26, corresponding to 17/15/12 times PE in 24-26, maintaining a “superior to the market” rating.

Risk warning: Overseas demand falls short of expectations, consumer demand falls short of expectations, etc.