The company's 2024H1 revenue maintained steady growth, and the auto parts sector performed well. 2024H1 achieved revenue of 1.752 billion yuan, an increase of 1.01%, and realized net profit to mother of 0.075 billion yuan, a decrease of 9.64%; the company achieved revenue of 0.934 billion yuan for finished bearings and ferrules, which was basically the same as the previous year. As downstream wind power installations fell short of expectations in the first half of the year, the company's wind power roller revenue declined, and the decline is expected to be reversed in the second half of the year. The company's auto parts achieved revenue of 0.196 billion yuan, an increase of 14.20% over the same period. Among them, airbag gas generator components achieved revenue of 0.092 billion yuan, an increase of 32.90%. It stems from the growth in demand from existing customers and the continuous development of new customers. Thermal management system components achieved revenue of 0.545 billion yuan, an increase of 7.20% over the same period. Affected by downstream wind power demand falling short of expectations, we slightly lowered our profit forecast. The company's net profit for 2024-2026 is 0.187/0.237/0.293 billion yuan (previous value was 0.195/0.239/0.299 billion yuan), EPS is 0.51/0.65/0.80 yuan, and the PE corresponding to the current stock price is 25.9/20.4/16.5 times. The short-term pressure will not change the long-term growth trend and maintain the “buy” rating.

The company's profit margin remained stable, and expenses increased slightly

The company's gross margin has been rising steadily: in 2024H1, the company's gross margin was 16.57%, +1.21pct. Raw materials such as bearing steel, aluminum, and copper required for the company's production accounted for a high proportion of production costs. The company has signed material price linkage agreements with about 70% of customers, and raw material prices have little impact on gross margin. 2024H1's expense ratio increased slightly year-on-year. The sales/management/finance/R&D expense ratio was 2.46%/5.24%/0.42%/3.17%, respectively, +0.4pct/+0.21pct/+0.71pct, respectively. The increase in sales expenses was due to the merger and acquisition of WJB Holdings and its subsidiaries, and the increase in R&D rates was due to the company's investment in new product research and development.

The company is actively developing screw products, and progress is remarkable

The company pays great attention to the application prospects of screws in emerging industries, and takes product development and market development in related fields as a key direction for future development. At present, it has completed rapid iteration of screw products, including trapezoidal screws, ball screw pairs, and planetary roller screws. It has a talent pool of various processes, design, R&D, etc.; has independent design and forward development capabilities based on customer needs; and has manufacturing capabilities throughout the entire industry chain from forging, machining, heat treatment, hard vehicles and various types of grinding, processing, assembly, testing and development. 2024H1 has enabled small-batch product sales.

Risk warning: The boom in the bearing industry is declining, and the robot business is progressing less than expected.