1H24 results are in line with market expectations

The company's 1H24 revenue was 0.594 billion yuan, up 20.0%, net profit to mother was 0.065 billion yuan, up 15.0%, after deducting non-net profit of 0.064 billion yuan, up 13.9%; of these, 2Q24 revenue was 0.325 billion yuan, up 20.7%, net profit to mother 0.038 billion yuan, net profit to mother was 0.038 billion yuan, net profit increased by 58.2% and 43.1%, after deducting non-net profit of 0.038 billion yuan, same increase of 58.4 billion yuan %, the ring increased by 47.0%. The company's 1H24 performance was in line with market expectations.

Development trends

Revenue from the NEV business grew at a high year-on-year rate, which encouraged the accelerated release of fuse orders. Benefiting from the high demand for new energy vehicles in China, the increase in the share of major downstream supporting customers, and the steady penetration of high-voltage fast charging models, the company's 1H24 revenue was 0.365 billion yuan, an increase of 45.4%. If we take into account the annual decline, we estimate that the delivery cycle may reach 50-60% year-on-year; by product, the 1H24 incentive fuse achieved revenue of 49.465 million yuan, an increase of 167.2%. Revenue from unstimulated fuses was about 0.316 billion yuan, an increase of 35.9% for new high-voltage fast charging models Under continuous interpretation, the company encouraged the accelerated release of fuse products, and the company occupied a major share in the domestic non-Tesla market. In terms of profit, the gross margin of the 1H24 NEV business fell 2.45ppt to 37% due to the annual decline in products and price increases for the main materials copper and silver. However, as the price of the main material copper/silver falls and the share of high-profit incentive fuses increases, we expect that the company's 2H24 gross margin may recover.

The revenue growth of Fengguang Storage is under pressure, and gross margin has declined. The company's 1H24 wind and solar storage fuse business revenue was 0.166 billion yuan, down 1.88%, and growth was under pressure. We speculate that the main reasons are: 1) downstream optical storage demand began to pick up rapidly in 2Q24, and the industrial chain may have short-term storage; 2) Increased market competition has led to a reduction in product prices. In terms of profit, Fengguang's gross margin was also affected by price cuts and price increases for the main materials copper and silver. 1H24 fell 3.1 ppt to 39.9% year on year. Looking ahead to 2H24, demand for energy storage and photovoltaics continues to rise, which is expected to accelerate downstream inventory replenishment and drive a recovery in the growth rate of the wind storage business. Gross margin is also expected to improve under falling prices of main materials and optimization of sales structures (demand for high-profit energy storage products is stronger).

The cost side has improved significantly, and 2H24 may be further optimized. The company's expenses during the 1H24 period were 25.6%, a year-on-year decrease of 0.3ppt. Among them, the fee for the 2Q24 period was 23.4%, the same reduction was 2.6 ppt/loop reduction 4.0ppt, and the rate for the 2Q24 period was 17.5% after excluding equity incentive fees. The comparable caliber decreased by 1.4 ppt/loop down 3.7 ppt, and there was a significant improvement on the cost side. Looking ahead to 2H24, we expect the fee side to be further optimized as equity incentive fees decline and revenue scale increases.

Profit forecasting and valuation

We kept the company's 2024/2025 profit forecast of 0.172/0.279 billion yuan unchanged. Due to the decline in the valuation center, we lowered the company's target price by 9.5% to 95 yuan. The current stock price corresponds to 26.5x/16.4x P/E in 2024/2025, and the target price corresponds to 36.6x/22.6x P/E in 2024/2025, with 38.0% upside to maintain the industry's outperforming industry rating.

risks

Global demand for new energy vehicles fell short of expectations, global wind storage machines fell short of expectations, prices of raw materials copper and silver fluctuated greatly, and increased market competition led to a decline in profits.