Event: The company released its 24-year semi-annual report. The 24H1 year achieved revenue of 1.752 billion yuan (+1.01%), net profit due to mother 0.075 billion yuan (-9.64%), and net profit of non-return to mother 0.072 billion yuan (+6.74%). 24Q2 achieved revenue of 0.979 billion yuan (+5.92%) in a single quarter, net profit due to mother 0.037 billion yuan (-13.19%), and net profit not attributable to mother of 0.037 billion yuan (+0.60%).

24H1 revenue was +1.01% year-on-year, and performance was in line with expectations. Looking at 24H1's revenue by product: finished bearings and ferrules were 0.934 billion yuan, which was basically the same year on year; wind power roller revenue declined due to downstream installations falling short of expectations, and sales and follow-up orders improved markedly in the second half of the year, which is expected to reverse the decline in the first half of the year; 0.196 billion yuan (+14.20%) for auto parts, of which 0.092 billion yuan (+32.90%) for automotive safety parts; 0.545 billion yuan (+7.20%) for thermal management system components.

24H1 gross margin increased year on year, and net sales margin decreased slightly year on year. 24H1 gross margin was 16.55%, +1.16pct year on year; net sales margin was 4.51%, -0.45pct year on year. On the cost side, the 24H1 sales/management/R&D/finance expense ratio was 2.45/5.25/3.14/ 0.40%, +0.38/+0.24/+0.66/+0.00pct compared to the same period.

Common underlying technology leader before bearing grinding, big industry enabler starts a growth cycle. 1) Automobile bearing products: The company is actively developing the aftermarket for third-generation passenger car wheel bearing units, and the fully automatic assembly line has been successfully commissioned and targeted for new projects by well-known domestic OEMs. At the same time, the company is also actively promoting the development of automotive aftermarket marketing channels. 2) Screws: According to the 24-year semi-annual report, the company has built a complete design and development team through the introduction of professionals and internal personnel, and is also building two specialized screw workshops. One is a ball screw component and parts workshop, the products are mainly used in new energy vehicle steering systems and braking systems; the other is a planetary roller screw components and parts workshop. The products are mainly used for core components of robot actuators. At this stage, the technology and process are gradually being finalized and delivered in small batches to leading domestic and foreign companies. While increasing investment in related product development and equipment, the company is also strengthening the development of downstream customers to help some key domestic customers complete the screw design and sample delivery work. 3) Robot bearings: including customized deep groove ball bearings, four-point contact ball bearings, angular contact ball bearings and needle roller bearings; high-load, high-precision tapered roller bearings, flexible thin-walled bearings, and cross roller bearings. The company has successfully developed a full range of robot bearing products, supporting robot reducer companies such as Nangao Gear, Newstar Dart, ZD Harmonics, and Raffle Harmonics. 4) Thermal management: The company has successfully developed new products such as thermal management system hoses, system tubes, automotive refrigerant flow boards, and electric vehicle thermal management system integrated module valve terminal assemblies, and has gradually completed the transformation and upgrading from thermal management system components to system integration.

Due to changes in share capital, we slightly adjusted the company's forecast for 24-26 net profit of 0.188, 0.234, and 0.26 billion yuan (previous values were 0.188, 0.234, and 0.261 billion yuan), respectively. Using a relative valuation method, we referred to the 24-year average of 29 times PE, and the corresponding target price was 14.79 yuan, maintaining the “buy” rating.

Risk warning: progress in new field expansion falls short of expectations; automobile demand falls short of expectations; wind power installed capacity falls short of expectations; risk of asset impairment; demand from major customers falls short of expectations; new customer expansion and new product development fall short of expectations; risk of rising raw material prices.