occurrences

The company released its 2024 semi-annual report, achieving operating income of 2.14 billion yuan, +57.1% year-on-year, and net profit to mother of 0.31 billion yuan, or +145.8% year-on-year. Among them, Q2 achieved revenue of 1.1 billion yuan, +47.5% year over month, and realized net profit of 0.15 billion yuan to mother, +86.5% year over year, -9.9% month on month.

The automotive business maintained rapid growth, and consumer electronics improved steadily

2024H1 achieved revenue of 2.14 billion yuan, or +57.1% YoY, of which automotive connectors achieved revenue of 0.6 billion yuan, +90.3% YoY; RF connectors and cable components achieved revenue of 0.5 billion yuan, +40.9% YoY. The sales volume of the company's automotive connector customer Geely/Great Wall/Changan/Chery/Ideal/BYD 2024H1 increased 41.0%/7.8%/9.7%/48.4%/35.8%/28.8% year-on-year respectively, driving the company's automobile business to continue to expand; 2024H1 domestic mobile phone shipments reached 0.147 billion units, +13.2% year-on-year, and the recovery of the smartphone industry led to a steady recovery in the company's main business.

Consumer electronics profits are picking up, and the automotive business is expected to increase profit stability 2024H1's gross margin was 33.9%, +2.4pct year on year. Among them, the gross margin of RF connectors and cable components/electromagnetic compatibility parts/automotive connectors was 45.0%/33.4%/40.8%, respectively, +3.1/5.7/1.4pct year on year, mainly due to the increase in consumer electronics utilization rate and obvious vehicle volume scale effects. Q2 The company's net profit to mother was 0.15 billion yuan, +86.5% year over month, and -9.9% month on month; gross margin was 32.5%, +1.3 pct year over year, and -2.8 pct month on month. The month-on-month decline is likely mainly due to the regular annual decline of automobiles. It is expected that the gross margin of the automobile business will rise steadily in the second half of the year as product structure improves and costs continue to fall on the manufacturing side and material side. 2024H1 automotive connectors accounted for 27.8% of revenue, compared to +4.8pct. The company's automotive connector competition pattern is good and profit level is high. As the share of automobile business revenue increases, the company's overall profit stability is expected to improve.

The penetration of advanced intelligent driving is accelerating, and the company is expected to fully benefit

The 2024H1 domestic L2+ (standard high-speed NOA or ALC) penetration rate reached 9.9%, +4.9pct compared to the previous year, and the penetration rate of high-end smart driving models accelerated. Referring to the electrification process, the penetration rate of models with advanced intelligent driving functions represented by L2+ has entered the 5%-30% stage. As high-quality supply continues to be introduced and functions continue to be optimized and iterated, the L2+ penetration rate is expected to increase rapidly. High-end smart driving penetration is driving an increase in the average sensor usage of bicycles, and demand for high-speed high-frequency connectors is strong. As a domestic supplier of high-speed connectors for scarce automobiles, the company is expected to fully benefit.

Investment advice

We expect the company's revenue for 2024-2026 to be 4.33/5.38/6.61 billion yuan, with year-on-year growth rates of 38%/24%/23%, respectively; net profit to mother of 0.66/0.85/1.07 billion yuan, with year-on-year growth rates of 85%/29%/26%, EPS 1.6/2.0/2.5 yuan/share, respectively, and CAGR-3 44%. As downstream consumer electronics are expected to continue to thrive, automotive high-speed connectors have entered a period of rapid growth and maintained a “buy” rating.

Risk warning: Vehicle sales fall short of expectations; consumer electronics recovery falls short of expectations; automotive connector customer development falls short of expectations; penetration of high-level intelligent driving models falls short of expectations.