Incident: The company released its 2024 semi-annual report, achieving revenue of 93.386 billion yuan, YoY +16.47%; net profit to mother of 2.284 billion yuan, YoY +210.41%; deducted non-net profit of 1.613 billion yuan, YoY +201.83%. Looking at the second quarter, the company achieved revenue of 47.499 billion yuan, YoY +12.54%, QoQ +3.51%; net profit to mother 1.3 billion yuan, YoY +166.17%, QoQ +32.16%; net profit after deducting non-net profit of 1.017 billion yuan, YoY +1117.14%, and QoQ +70.39%. The company's overall performance was in line with expectations.

Key points of investment:

The “1+4+N+ Ecological Chain” business structure continues to develop. According to the company announcement, 1: In terms of display devices, the company 24H1 achieved revenue of 78.013 billion yuan and a gross profit margin of 13.91%. 4:1) The IoT innovation business achieved revenue of 17.156 billion yuan, the smart terminal accelerated overseas layout, and the second phase of the Vietnam smart terminal project started as scheduled, and the shipment volume of IoT applications and low-power terminals in the whiteboard, splicing, ESL and other market segments remained the highest in the world; 2) The sensing business achieved revenue of 0.163 billion yuan, and Suzhou Sensing completed the introduction of many leading customers in the photovoltaic, lithium battery and other industries; 3) The MLED business achieved revenue of 4.033 One billion yuan, an increase of 780.69% year on year. LED directly showed the expansion of application scenarios, and leading backlighting business linked leading industry customers to launch various high-end products such as mini, curved, and special-shaped products in NB, MNT, and automotive segments; 4) The smart medical business achieved revenue of about 0.904 billion yuan. Digital hospitals continued to improve their core capabilities, and the total number of outpatients reached 0.76 million, an increase of 31% over the previous year. The total number of discharges reached 0.031 million, an increase of 22% over the previous year.

Continue to develop high value-added fields. According to the announcement, the company's five mainstream application shipments in the LCD field have steadily ranked first in the world, with continuous product structure optimization, and stable breakthroughs in high-end flagship products: oversized (≥85”) products maintain the number one global shipment volume; in the flexible OLED field, according to Qunzhi consulting data, 24H1's flexible OLED panels shipped about 64.4 million pieces, an increase of 27% over the previous year, ranking second in the world and number one in China, and continued to increase shipments of high-end products such as LTPO and folding, increasing the proportion of high-end flagship products shipped. The company's flexible AMOLED high-end folding products are exclusively for customers, creating a variety of brand-first products.

The accelerated exit and transformation of the Korean and Japanese plants brought opportunities for integration. Historically, the restructuring and discontinuation of production by Japanese and South Korean panel makers and the prudent investment of **** manufacturers have indirectly increased the share of mainland Chinese panel makers in global production capacity. According to OleDIndustry information, LG Display has decided to sell its Guangzhou G8.5 LCD factory (including GP1 and GP2). According to CINNO information, Sharp issued an announcement on August 21 announcing that its SDP Sakai Plant (G10) has completely stopped production. According to LCD, Inntron announced on August 15 the sale of Inntech's fourth factory (G5.5), which accounted for about 10% of the original production capacity. Nanke's fourth factory mainly produces panels for laptops and displays; Inntron still has plans to continue to close the factory and dispose of plant assets, including the module factory located in Nanke, as well as its second and third factories.

Adjust profit forecasts to maintain a “buy” rating. We raised the company's displayed gross profit margin and adjusted the company's net profit to 5.406/8.535/10.677 billion yuan (previously 4.548/7.687/9.66 billion) in 24-26, corresponding to 26/17/13X in 24-26, maintaining the “buy” rating.

Risk warning: Industry sentiment falls short of expectations; risk of sharp downstream decline; risk of overseas supply chain.