Steady growth continued in the first half of 2024. In the first half of 2024, the company achieved operating income of 11.09 billion yuan, a year-on-year increase of 13.8%, net profit of 1.068 billion yuan, a year-on-year increase of 20.4%, gross profit margin of 28.5%, an increase of 2.2 percentage points over the previous year, and capital expenditure of 1.093 billion yuan, a year-on-year decrease of 45.7%, a balance ratio of 26.9%, and a year-on-year decrease of 1.5 percentage points. While the overall scale of operations continues to grow, the quality of operations continues to improve.

Major breakthroughs have been made in the car body and chassis structural parts business. In the first half of 2024, the company made a major breakthrough in the car body chassis structural parts business. After breaking through the North American Honda structural parts business in 2023, the company further obtained Honda's North American market share, continued to expand its share in the Geely and Strantis body chassis structural parts business, broke through sub-frame products for the first time, received orders from Volvo, and obtained orders for the electronic control case and motor case business for the first time.

A share repurchase is proposed. According to the company's announcement, the board of directors of the company intends to exercise powers under the general mandate granted to the board of directors in accordance with the resolution passed by the company's shareholders at the company's annual general meeting of shareholders held on May 31, 2024 to repurchase up to 116199359 shares of the company. The board of directors has decided to use share repurchase authorizations and repurchase shares on the open market from time to time according to market conditions to use up to HK$0.5 billion in capital for proposed share repurchases.

Investment advice. A diversified product portfolio and an increasingly balanced customer structure will strongly support the long-term sustainable growth of the company's performance. We expect the company's net profit to be 2.18 billion yuan, 2.49 billion yuan, 2.94 billion yuan, and EPS of 1.88 yuan, 2.15 billion yuan, and 2.53 billion yuan, respectively. Considering the company's global advantages, we will be given 10-12 times PE in 2024, corresponding to a reasonable value range of HK$20.54-24.65 (as of August 23, 2024, at HK$1 = RMB 0.9151), giving “better than big “City” rating.

Risk warning. New energy vehicle sales risk, auto parts price reduction risk, raw material price increase risk.