1H24 Results Exceed Our Expectations

The company announced 1H24 results: revenue of 2.457 billion yuan, a year-on-year increase of 129%; net profit to mother was 0.15 billion yuan, turning a year-on-year loss into a profit. Among them, 2Q24's revenue for a single quarter was 1.619 billion yuan, up 162% year on year, up 93.4% month on month, net profit for the single quarter was 0.136 billion yuan, turning a loss from year to year into profit, and a sharp increase of 0.014 billion yuan compared to 1Q24. The performance exceeded our expectations, mainly due to the volume of high-end CIS chips exceeding expectations.

Development trends

Shipment of CIS high-end pixel products for smartphones has been accelerated. The company announced smartphone revenue of 1.25 billion yuan in the first half of the year, an increase of 295% over the previous year. The company announced that high-end 50MP products used in flagship mobile phone main cameras, wide-angle, and telephoto lenses have begun mass production and sales, accounting for more than 50% of smartphone business revenue. We believe this reflects 2Q24's growing market share in high-end CIS, a leading customer. As the company's end customers grow and the company's larger, higher-level CIS products are launched one after another, we are optimistic that the company's high-pixel product shipments will continue to grow and become the main driving force for the company's growth.

Automobile CIS received an order for mass production of ADAS. 1H24's automotive electronics business revenue increased 115.19% year over year. The company announced that it is currently continuing to deepen cooperation with many mainstream manufacturers, covering a significant increase in the number of model projects, and further improving industry solution capabilities. Currently, CIS products used in intelligent driving assistance systems (ADAS) have received commercial mass production orders for the first time, and the brand influence has increased significantly. New application aspects: On August 21, the company announced the successful trial production of a 0.18 billion pixel full-frame CIS product. The product is aimed at high-end camera applications and was jointly launched by the company and Hefei Crystal. The company believes that the product has successfully filled the technical gap of local companies in this field.

The net profit margin for 2Q24 improved markedly, and we are entering a period of profit harvesting. The net profit margin of 2Q24 rose from 1.68% in 1Q24 to 8.38%, up 6.7 ppts month-on-month, turning a year-on-year loss into a profit. We are optimistic that the company's net profit margin will show a steady upward trend as revenue rises under the influence of operating leverage.

Profit forecasting and valuation

As the volume of high-end products exceeded expectations, we raised our 24-year revenue by 42.2% to 5.781 billion yuan, first introduced a 25-year revenue forecast of 7.663 billion yuan, raised 24-year net profit by 12.8% to 0.447 billion yuan, and introduced a 25-year net profit forecast of 0.794 billion yuan for the first time. We maintained our outperforming industry rating and raised our target price by 21.2% to 63 yuan, corresponding to 56/32 times P/E in 24/25. The current stock price corresponds to 24/25 43.5/24.5 times P/E, with 29.5% room for growth.

risks

Market demand falls short of expectations, market competition intensifies, product expansion falls short of expectations, trade frictions.