Event: The company released its 2024 semi-annual report. With 2024H1, the company achieved operating income of 1.12 billion yuan, a year-on-year increase of 1.0%; net profit to mother was 49.83 million yuan, an increase of 312.0% year-on-year, mainly due to a sharp increase in government subsidies during the current period; net profit not attributable to mother was -3.02 million yuan, which significantly reduced losses over the previous year. With 2024Q2, the company achieved operating income of 0.7 billion yuan, a year-on-year increase of 38.1%; net profit due to mother was 65.75 million yuan, compared to 0.22 million yuan in the same period last year; net profit not attributable to mother was 20.7 million yuan, turning a year-on-year loss into a profit.

The rapid expansion of the semiconductor business shows that the business is gradually recovering. By product, 2024H1's revenue in the display/semiconductor/new energy sector was 0.78/0.23/0.09 billion yuan, respectively, or +5.4%/+86.2%/-59.8% year-on-year. In terms of hand orders, as of 2024H1, the company's on-hand orders were 3.44 billion yuan, +10.0% year over year. Of these, display/semiconductor/new energy orders were 1.04/1.77/0.67 billion yuan, respectively, -17.1%/+29.5%/+30.0% YoY. In the display sector, the recovery situation in the display sector continues to improve due to positive factors such as investment in new large-scale OLED factories, AIPC and AI mobile phone equipment updates, new microOLED investment expansion projects, and the upgrading of old production lines based on production automation. In the semiconductor field, the company layout is becoming more and more perfect. Some products have been sold in batches, and the products are in a period of rapid release.

The gross profit margin and expense ratio remained stable. 2024H1, the company's gross margin was 43.1%, -0.7pp; the net margin was 3.9%, +4.6pp; the period expense ratio was 50.5%, +0.6pp, with sales/management/R&D/finance expenses ratios of 8.8%/12.5%/26.3%/2.9%, respectively, -1.2/+0.7/+0.9pp, year-on-year, respectively.

R&D efforts remain strong, and the product matrix continues to improve. For 2024H1, the company invested 0.3 billion yuan in R&D, +2.6%. Of these, R&D investment in the display/semiconductor/new energy sector was 0.14/0.13/0.03 billion yuan respectively, -6.9%/+31.3%/-31.1% year-on-year. The company continues to maintain R&D investment intensity and further enhance the core competitiveness of the product. On the display side, the company set up Shenzhen Precision Inspection to further help the company expand AR/VR industry-related business in the field of new displays. New display-related testing and debugging equipment products continue to develop. The micro-OLED module inspection terminal has reached cooperation with top global customers and has completed partial delivery; the AR field has reached customized development cooperation for core optical instruments with leading customers. In terms of semiconductors, the company expanded from front-end measurement equipment to the semiconductor manufacturing and packaging industry chain through capital increase in Hubei Jiangcheng Laboratory, which helps the company seize the rapid development opportunities of the data center, supercomputing, and AI industries and help the semiconductor business grow.

Profit forecasting and investment advice. The company's net profit from 2024-2026 is estimated to be 0.24, 0.32, and 0.45 billion yuan, respectively, corresponding to the current PE price of 61, 45, and 33 times, and the compound growth rate of net profit to mother in the next three years is 44%. The company's high investment in the semiconductor business is on the verge of increasing volume, indicating that the business is expected to benefit from a recovery in industry demand and maintain a “buy” rating.

Risk warning: Risk of semiconductor business expansion or falling short of expectations, downstream demand recovery or falling short of expectations, and customer verification.