Intron Tech reported 1H24 revenue of RMB 2.84bn (+8% YoY) and net profit of RMB 97.7mn (-37% YoY), both below our/consensus estimates, mainly due to the GPM decline to 15.9% (-4.7ppts YoY) on intensified competition and price pressure from auto OEM customers. Looking ahead to 2H24E, mgmt. guided net profit margin to recover HoH on new order wins in new energy/ADAS and overseas customer expansion. We trim FY24-25E EPS by 43-49% to factor in the 1H24 miss, margin pressure and weaker topline growth. Despite near-term industry headwinds, we think the current valuation of 5.4x/3.2x FY24/25E P/E is attractive compared with A/H share peers. Our new TP of HK$ 2.35 is based on a lowered 10x FY24E P/E for near-term industry headwinds (vs prior 12x P/E).

Upcoming catalysts include rising ADAS penetration and NEV client share gains.

1H24 earnings below expectations due to margin weakness. By

segment, new energy/automation & connectivity/cloud server revenue delivered strong growth 16%/13%/25% YoY, while body control/safety/powertrain segments were weak at +1%/-9%/-26% YoY. We are encouraged by solid growth from new energy segment, given rising client penetration and market share gains on new projects. 1H24 GPM came in at 15.9% (vs. 20.6% in 1H23), reflecting pricing pressure along the auto supply chain. 1H24 R&D expense ratio was lower at 7.6% (vs. 8.9% in 1H23), and mgmt. expected a normalized level of R&D spending in FY24E.

2H24E outlook: new orders and customer wins to offset industry

headwinds. Mgmt. expects Intron's topline growth to remain solid in 2H24E driven by China NEV exports and HEV demand, while margin pressure might persist in near term given downstream client pricing pressure. Mgmt. also expected overseas market expansion to serve as key growth driver in FY25/26E, after recent office expansion in Hong Kong and Europe. Overall, we estimate Intron's revenue/net profit to grow +9%/-29% YoY in FY24E.

Expect margin to recover gradually in FY25E; Maintain BUY. We trim

FY24-25E EPS by 43-49% to reflect weak 1H24 results and margin pressure in 2H24E. Our new TP of HK$2.35 is based on a lowered 10x FY24E P/E (vs. previous 12x FY24E P/E). Trading at 5.4x/3.2x FY24/25E P/E, we think Intron's valuation is attractive, as we expect new order wins and overseas expansion will drive margin recovery in FY25/26E.