Interim results: In '24, H1 achieved revenue of 2.353 billion yuan, yoy +33.5%; net profit to mother of 0.19 billion yuan, yoy +431.5%; net profit of 0.178 billion yuan after deducting non-net profit of 0.178 billion yuan, reversing losses year-on-year. Among them, Q2 achieved revenue of 1.251 billion yuan, yoy +30.2%, +13.5% month-on-month; realized net profit to mother of 0.108 billion yuan, yoy +561.9%, or +33.6% month-on-month.

Orders have maintained strong growth, and profitability has increased significantly

On the revenue side, along with the recovery in the powder metallurgy and consumer electronics industries, the company's orders improved significantly. 24H1 achieved revenue of 2.35 billion yuan, yoy +33.5%, and the three major business segments of P&S/SMC/MIM achieved revenue of 1.11/0.46/0.77 billion yuan, yoy +26.7%/-6.5%/+101.1%, of which Q2 achieved revenue of 0.58/0.28/0.4 billion yuan (MIM is an estimated S/), P&SMC All businesses achieved month-on-month growth, Q2 revenue reached a record high, and the MIM business maintained ultra-rapid growth. On the profit side, the company's 24H1 gross profit margin of 24.4%, yoy+5.7pcts, gross margin of the P&S/SMC/MIM sector was 25.6%/24.3%/21.8%, respectively, and yoy+6.1pcts/2.5pcts/10.9pcts, all of which achieved significant increases. On the cost side, the cost rate was 15.0% during the 24H1 period, yoy-2.6pcts, and the ability to control expenses was continuously enhanced. In the end, 24H1 recorded a net profit margin of 8.7%, yoy+7.4pcts, and a significant increase in profitability.

The three platforms have worked together to achieve remarkable results. MIM hinges take advantage of the large volume of folding screen phones and MIM: folding screen hinges have sufficient growth momentum. The consumer electronics industry has continued to recover since 23Q3. The company's MIM business revenue has steadily rebounded quarterly and continued to grow for 24 years, fully benefiting from the folding screen phone volume & leading supplier logic. 24H1 revenue yoy +101.1%. Following the pace of new product launches from major customers, the company has been equipped with 5 folding machine module production lines. The development model has changed from MIM parts to MIM parts+modules. At the same time, MIM application scenarios continue to expand. The company has successfully developed a total of two types of MIM parts for high-speed connector covers. One part number has been delivered in batches to indirectly support Nvidia's next-generation GB200NVL72 server; the other has completed domestic verification, and samples have been submitted abroad for final verification.

P&S: The automotive sector continues to expand, and the industrialization of axial magnetic flux motors accelerates. 24H1 automobile/home appliance products achieved revenue of 0.84/0.23 billion yuan, yoy +28.4%/+24.0%, respectively. During this period, China exported 2.793 million vehicles, yoy +30.5%, achieving continuous rapid growth. The company still has a lot of room for import substitution and global market expansion for powder metallurgy products in the automotive industry. At the same time, the company has increased the integration of P&S and SMC technology, completed the infrastructure construction of a 1,000-square-meter axial flux motor production workshop, and set up an axial flux motor assembly line to achieve an axial flux motor revenue of 0.243 million yuan.

SMC: The field of AI computing power opens up room for growth. The 24H1 SMC segment's revenue yoy -6.52%, but it has rebounded steadily since Q1 and reached 0.28 billion yuan in a single quarter in Q2, a record high. The 24H1 photovoltaic/new energy vehicle sector accounted for 35.9%/16.5% of SMC's revenue respectively. At the same time, the company followed the development trend of AI computing power and promoted the development of integrated metal soft magnetic inductors. 24H1 SMC achieved 0.05 billion yuan in revenue from chip inductors and soft magnetic materials for server power supplies.

Investment advice: As a leader in the domestic powder metallurgy industry, the company's three main business highlights are outstanding. MIM hinge is expected to fully benefit from the folding screen phone volume & leading supplier logic. We revised the company's net profit to mother for 24-26 from 0.358/0.45/0.546 billion yuan. The company's net profit for 24-26 is 4.04/ 5.21/ 0.631 billion yuan respectively, corresponding to the closing price of PE on August 29 is 23/18/15x, respectively. Referring to the industry average PE, the company was given a 24-year PE of 28x, corresponding to a target share price of 18.3 yuan/share, and adjusted to a “buy” rating.

Risk warning: risk of market demand falling short of expectations; risk of large fluctuations in raw material prices; risk of production technology; risk of project construction falling short of expectations; exchange rate risk.