Incident: On August 23, the company released its 2024 semi-annual report. 24H1 achieved operating income of 2.771 billion yuan, +22.93% year-on-year; realized net profit of 0.216 billion yuan, +1.84% year-on-year, and realized net profit of 0.197 billion yuan without return to mother, +2.83% year-on-year. Among them, 2024Q2 achieved revenue of 1.404 billion yuan, +15.98%/+2.65% month-on-month; realized net profit of 0.102 billion yuan, or -17.91%/-11.12%, year-on-month; realized net profit of 0.095 billion yuan without return to mother, or -19.57%/-7.33% year-on-month, respectively.

Vehicle power revenue has increased steadily, profit levels have remained stable, and the performance and cost advantages of fourth-generation products have been strengthened.

2024H1, the company's vehicle power product revenue was 2.324 billion yuan, up 15.20% year on year, accounting for 83.86% of total revenue, of which integrated products revenue was 2.298 billion yuan, accounting for 98.91% of vehicle power supply product revenue. The company's automotive power products remained stable in an environment of increased market competition, with an overall comprehensive gross margin of 20.63%.

The company's 800V automotive integrated power supply product customers include Xiaopeng, a new car builder, Rantu, and Zhiji. Among them, the Xiaopeng G9, X9, MPV of a leading new car builder, the Zhiji LS6, and the modified LS7 models have all been mass-produced and shipped. The volumetric power density of the company's fourth-generation products continues to increase by 33.6% compared to the previous generation products, the cost has been further reduced, and mass production and delivery have already been carried out.

Fast discharge of electric drive all-in-one assembly products. The company's electric drive system has been designated by many well-known domestic and foreign companies such as SAIC Motor Group, Great Wall Motors, and Chery Motors, and has achieved mass production and shipment of motor controllers, electric drive three-in-one assembly products, and “power+electric drive” electric drive all-in-one assembly products. 2024H1, the company's electric drive system product revenue was 0.285 billion yuan, up 299.99% year on year, accounting for 10.27% of total revenue. Among them, electric drive all-in-one assembly products achieved revenue of 0.206 billion yuan in the first half of 2024, an increase of 368.24% over the previous year. Against the backdrop of the promotion of integrated technology solutions and cost reduction and efficiency of new energy vehicles, the company's electric drive all-in-one assembly products were rapidly released.

Actively expand overseas customers, and the export business can be expected in the future. On the export side, integrated automotive power supply products have been mass-produced and shipped to Stellantis Group, and have been designated by overseas car companies such as Renault, Aston Martin, and Ferrari.

2024H1, the company's export business revenue was 0.268 billion yuan, down 16.49% year on year, accounting for 9.66% of total revenue, down 4.56pp year on year. Mainly due to the impact of the shipping environment, the share of the company's overseas sales and consignment methods has increased. The actual share of final export product revenue is higher than the statistics. As the company promotes overseas customer expansion and targeting new customers and new models, the export business is expected to become one of the main growth drivers in the future.

The increase in R&D investment has led to a high short-term cost rate. 2024H1, the company invested 0.179 billion yuan in R&D, up 62.43% year on year. R&D expenses accounted for 6.45% of total revenue, up 1.57pp year on year. The company's cost rate during the period was 12.05%, an increase of 2.06pp over the previous year. Among them, the R&D cost rate increase contributed the most to 76%. As of June 30, 2024, the company has obtained 439 authorized patents (including 62 domestic invention patents and 21 overseas invention patents) and 241 computer software copyrights. After more than 10 years of continuous R&D investment and technological innovation, we have accumulated 16 core technologies with independent intellectual property rights, enabling the company to achieve strong competitiveness in product performance.

Profit forecast and investment advice: As the penetration rate of new energy vehicles continues to increase, the company's new production capacity is gradually released, fast charging and going overseas are expected to open up room for the company's growth. The company's net profit for 2024-2026 is estimated to be 5.5/7.1/ 0.83 billion yuan, respectively, with a CAGR of 18.3%. The company was given 22 times PE in 2024, corresponding to a target price of 28.60 yuan, maintaining a “buy” rating.

Risk warning: New energy vehicle sales fall short of expectations, increased market competition, and international trade frictions.