Incident: The company announced that 24H1 revenue was 2.457 billion yuan, YoY +129.04%; net profit due to mother was 0.15 billion yuan, reversing losses year over year; net profit not attributable to mother was 0.153 billion yuan. Looking at 24Q2 alone, the company achieved operating income of 1.619 billion yuan, YoY +161.9%, and QoQ +93.4%. The revenue scale was a record quarterly high; net profit to mother was 0.136 billion yuan, which reversed the loss year on year; and 0.133 billion yuan after deducting non-net profit. The company's performance is in line with the forecast range.

Key points of investment:

The mobile phone market successfully opened a second growth curve. According to the semi-annual report, the company achieved revenue of 0.976 billion yuan, YoY +50.36%, accounting for 39.73% of revenue; smartphones achieved revenue of 1.249 billion yuan, YoY +295.46%, accounting for 50.84% of revenue; and automotive electronics achieved revenue of 0.232 billion yuan, YoY +115.19%, accounting for 9.43% of revenue.

In the smartphone sector, the company's shipments of high-end 50M products used in flagship mobile phone cameras, wide-angle, and telephoto lenses have risen sharply. In particular, mass production of various XS series products has led to a significant increase in revenue in the smartphone sector. The company's cooperation with customers has deepened across the board, and its market share continues to increase. At present, it has successfully opened up a second growth curve in the smartphone field.

High-end mobile phone products accelerate large-scale mass production. The company's mobile CIS products cover the mainstream demand of 8M-50M in the current market and are expected to become the largest main business in 2024. In response to the demand for high-end flagship models, several XS series high-end products for flagship cameras and auxiliary cameras (including telephoto and wide-angle) have been shipped on a large scale. According to the Starway platform information, in 2022, the company launched the SC550XS, the first 50MP ultra-high resolution 1.0 μm pixel size product, and the SC520XS, a 52MP ultra-high resolution 0.7 μm pixel size product. These two products were mass-produced in 2023. In January 2024, the company launched the SS580XS, the first 50M 1/1.28 inch product, which is the same platform product of 22nm HKMGStack. Aiming at the mainstream smartphone CIS market, the company is also developing in-depth technical cooperation with domestic fabs, using technological innovations such as single-chip integration to launch the SC5000CS, a more cost-effective high-resolution product. According to the company's announcement, high-end 50M products currently account for more than 50% of revenue in the smartphone business.

The performance and competitiveness of new security products have been further improved. According to the semi-annual report forecast information, with the recovery in demand in the security market, the company's product sales have increased significantly, and sales revenue has increased significantly. Currently, in the field of smart security, the company continues to make high-end efforts, and has successfully launched cutting-edge security product portfolios such as the Pro Series full performance upgrade series, AI Series advanced imaging series, and SL Series Super Star Light Series to better meet the intelligent stage of security monitoring. In 2023, the company launched a new 4K ultra-starlight-level image sensor with a large target surface, the SC880SL. In addition, it also launched several new upgraded AI series products, which can better enable smart wireless cameras and multi-camera solutions such as home IPC and AIoT terminals, successfully starting the path of iterative upgrading of AI series products. The company's machine vision products have been widely used in emerging application fields represented by drones, sweepers, and AR/VR; in industrial CIS, the company has launched a rich product matrix in the three categories of surface arrays, intelligent transportation systems, and linear arrays, covering all kinds of industrial inspection scenarios as well as mainstream industrial intelligence scenarios such as industrial barcode readers, AGV navigation systems, and 3D scanners.

Maintain profit forecasts and maintain a “buy” rating. We keep the company's profit forecast unchanged. We expect the company's net profit to be 0.382/0.61/0.801 billion yuan in 2024-2026, corresponding to PE of 51/32/24X, maintaining a “buy” rating.

Risk warning: customer orders fall short of expectations; industry sentiment falls short of expectations; supply chain risks.