1H24 results are in line with our expectations
The company announced 1H24 results: 1H24 achieved revenue of 3.643 billion yuan, +11% year over year; net profit to mother was 0.173 billion yuan, +2% year over year; net profit without return to mother was 0.157 billion yuan, +3% year over year. Corresponding to 2Q24, revenue was 1.889 billion yuan, +14% year over month; net profit to mother was 0.107 billion yuan, +14% year over month, +61% month on month; net profit without return to mother was 0.101 billion yuan, +20% year over month, and +81% month over month.
The results were in line with our expectations.
Development trends
2Q revenue increased month-on-month, with new energy and autonomous customers driving growth. By business, 1H24 aluminum casting/injection molding business revenue was 2.701/0.901 billion yuan, or +14.39%/+2.09%. We believe that although sales of foreign customers such as GM/Toyota/Honda are under relative pressure, new energy customers such as BYD/Xiaopeng contributed significantly. Passenger Federation data shows that 1H24 sales volume is +28.7%/+24.6% year-on-year. The company is making every effort to promote the transformation of new energy. The new energy business accounts for about 25% of die-casting revenue in 2023, the company plans to increase to more than 30% in 2024, and the new energy business accounts for more than 50% of total revenue in 2025. Focusing on domestic capital to develop orders, 1H24 undertakes orders for new energy products over 6 billion yuan from BYD, Geely, Chery, and Toyota, and more than 1.2 billion yuan for assembly projects.
The gross margin stage was under pressure due to a rise in production capacity, and cost reduction and fee control continued to be optimized. On the profit side, 1H24's gross margin was 15.3%, -3.1 ppt, corresponding to 2Q24 gross margin of 15.6%, year-on-year -2.7ppt, and month-on-month +0.6ppt; by business, the gross margin of 1H24 aluminum casting/injection-molded parts business was 14.86%/15.18%, respectively, or -3.79pp/ -1.94ppt. Gross margin declined year on year. We think it is mainly due to: 1) the production capacity of the Guangzhou project and the Tianjin project is climbing; 2) aluminum prices rose in the first half of the year, but customers have not yet made up the difference.
The net interest rate of the 1H24 company was 15.3%, -0.4ppt year on year. We think the decline was narrower than gross margin. We think it was mainly due to: 1) strengthening cost reduction and fee control, the fee rate was -1.2/-0.9ppt to 10.4% month-on-month during the 2Q24 period; 2) VAT deductions and tax relief also had a positive impact on net profit margin of 0.8ppt.
Integrated die casting continues to climb the slope and is optimistic about long-term development potential. On the customer side, 1H24 is developing 4 new products such as the front cabin and rear floor of new energy vehicles. In terms of production capacity, a total of 4 oversized intelligent die-casting equipment were mass-produced and climbed, corresponding to 4 models. Currently, the capacity utilization rate of the Guangzhou plant has reached 80%. We believe that as the company's integrated die casting production capacity climbs and increases, profitability is expected to continue to improve; in the long run, integrated die casting has the advantage of reducing costs and weight, the company has multi-dimensional advantages in equipment, production capacity, process and materials, and long-term customer development and performance growth are worth looking forward to.
Profit forecasting and valuation
We maintain our 2024/2025 earnings forecast. The current stock price corresponds to 2024/2025 13.2/11.8xp/E. Maintaining an outperforming industry rating, but due to the overall decline in the sector's valuation center, we lowered our target price by 15.6% to 13.5 yuan, corresponding to the 2024/2025 P/E price-earnings ratio of 18.4/16.6x. There is 40.0% upside compared to the current stock price.
risks
Price increases for upstream raw materials, risk of exchange rate fluctuations, risk of impairment of goodwill.