2024Q2's revenue continued to grow high, tied to high quality customers, and maintained a “buy” rating of 2024H1 to achieve revenue of 1.862 billion yuan (+38.77%, same below), net profit of 0.207 billion yuan (+20.78%), after deducting non-net profit of 0.195 billion yuan (+17.43%), net profit +44% year-on-year after excluding the impact of exchange earnings. In a single quarter, 2024Q2's revenue was 1.038 billion yuan (+33.42%), net profit due to mother 0.122 billion yuan (-5.8%), after deducting non-return net profit of 0.114 billion yuan (-9.41%). The 2024Q2 home appliance and automobile motor business continues to grow at a high rate. New SharkNinja/HOT projects in the home appliance business continue to receive new projects. We maintain profit forecasts. We expect net profit to mother of 0.41/0.54/0.67 billion yuan for 2024-2026, corresponding EPS of 1.10/1.44/1.81 yuan, and PE corresponding to the current stock price is 14.5/11.0/8.8 times, maintaining a “buy” rating.

The growth of the new 2024H1 customer, SharkNinja, drove the growth of the home appliance business. The automotive motor business continued to increase in 2024H1, achieving revenue of 0.967/0.677/0.148 billion yuan, respectively, and +26%/+56%/+69% year-on-year respectively. (1) Home appliance business: Growth is due to increased vacuum cleaner/personal care orders brought by new customer SharkNinja, increased orders for HOT electric fans and humidifiers from old customers, and improvements brought about by the resumption of TTI terminal sales. Furthermore, mass production of a new category of dishwashers has begun gradually. (2) Automobile motors: 2024H1 has added 7 new fixed-point projects, and the total sales amount over the entire life cycle exceeds 1.5 billion yuan. The home appliance business is tied to high-quality downstream major customers. The 2024Q2 SharkNinja cleaning appliances/other small household appliances had a year-on-year revenue increase of +12.64%/+176.22%, the 2024H1 Chuangke Industrial floor care revenue improvement, and SharkNinja's specific strong channel expansion and product development capabilities. The positive revenue growth trend is expected to drive the company's home appliance business to continue to grow. Automotive motors enter Nexte/ ZF premium customers, and with the volume of targeted projects, automotive motors are expected to maintain a high growth rate.

The gross margin of 2024Q2 increased year-on-year, and the financial expense ratio increased due to exchange rate fluctuations. The gross margin for 2024Q1/2024Q2 was 17.4%/17.9%, respectively, -0.7/+0.6pct year-on-year, respectively. On the expense side, the expense ratios for the 2024Q1/2024Q2 period were 6.47%/4.82%, respectively, and -2.95/+6.94pct, respectively. Among them, 2024Q2 sales/management/R&D/finance expenses rates were 0.46%/3.36%/-2.71%, respectively, +0.48/-0.33/+0.36/+6.42pct, respectively. The financial expense ratio increased significantly, mainly due to a decrease in exchange earnings and sales/management/R&D expenses. Under the combined influence, 2024Q1/2024Q2 net interest rates were 10.34%/11.74%, respectively, and +2.87/-4.89pct year-on-year respectively; net interest rates without return to mother were 9.86%/11.0%, and +2.7/-5.2 pct year-on-year, respectively. The decline in net interest rate to mother and net interest rate deducted from non-mother was mainly due to a decrease in exchange earnings.

Risk warning: Overseas demand is falling rapidly, raw material costs are rising, new business expansion falls short of expectations, etc.