Incident: On the evening of August 28, 2024, the company released its 2024 interim report. 2024H1 achieved revenue of 2.144 billion yuan, a year-on-year increase of about 57.11%; net profit to mother was 0.308 billion yuan, an increase of about 145.77% over the same period last year.
The 24H1 automotive electronics and soft board business grew significantly, and the gross margin of the consumer & automotive business both increased year-on-year.
With 2024Q2, the company achieved revenue of 1.104 billion yuan, a year-on-year increase of 47.51%, a year-on-month increase of 6.12%, and net profit to mother of 0.146 billion yuan, an increase of 86.48% year-on-year and a decrease of 9.9% month-on-month. Revenue for the first half of 2024 increased 57.11% year-on-year, mainly due to a sharp year-on-year increase in the company's consumer electronics and automotive electronics business shipments. In terms of profitability, 2024H1's gross sales margin was 33.85%, +2.37pct year on year, net sales margin was 14.34%, year-on-year +5.17pct, 24Q2 single-quarter gross sales margin 32.49%, month-on-month -2.82pct, net sales margin was 13.2%, and -2.35pct month-on-month. By business, 24H1 automotive connector's revenue was 0.597 billion yuan, +90.28% year over year; gross profit margin was 40.78%, +1.35pct year on year. RF connectors and cable connectors revenue 0.496 billion yuan, +40.92% year on year; gross profit margin 45.04%, +3.07pct; electromagnetic compatibility parts revenue 0.449 billion yuan, +15.46%; gross profit margin 33.40%, +5.72 pct; soft board revenue 0.26 billion yuan, +72.39%; gross profit margin 17.50%, year-on-year +15.19pct. In terms of expenses, the company's operating efficiency continues to improve, and production cost control is strong. The 2024H1 sales expense ratio and management expense ratio were 2.47% and 7.03%, respectively, a year-on-year decrease of 1.60 pct and 2.28 pct, respectively.
Domestic consumer electronics recovery & automotive connectors replace dual main lines to protect the company's performance growth. 1) The recovery in consumer electronics demand led to revenue growth: Demand in the mobile consumer electronics industry recovered. According to IDC data, 2024Q1 and Q2 global smartphone market shipments increased 7.8% and 6.5%, respectively. The company has become a core supplier for world-renowned smartphone companies such as Xiaomi, Opal, Backgammon, Samsung, Honor, ZTE, and Huawei, benefiting from the recovery in downstream demand, and ushered in year-on-year revenue growth in the mobile consumer electronics business. 2) The logic of the sharp rise in the volume and price of automotive connectors is clear. The company's automotive connector business continues to benefit deeply: the increase in the penetration rate of new energy vehicles and intelligent development are expected to lead to a sharp rise in the volume and price of automotive connectors, and the market capacity of automotive high-frequency high-speed connectors may further expand. The company has a complete range of automotive connector products, rich experience in mass production, and has successfully introduced into the supply chains of major domestic automobile manufacturers such as Geely, Great Wall, BYD, Changan, Chery, and Ideal, and has achieved large-scale shipments. The steady increase in NEV market share may lead to an increase in the shipment volume and output value of the company's automotive connector products.
Henghe Dingfu, a subsidiary of LCP's soft board business, turned a profit, and demand for soft boards from mobile phone brand customers surged. In 24H1, Henghe Dingfu achieved revenue of 0.302 billion yuan and achieved a net profit of 10.622 million yuan. The main reasons were: 1) a surge in customer demand from domestic mobile phone brands; 2) the introduction and mass production of foreign wearable devices; 3) demand from automotive customers began to increase. Henghe Dingfu's performance improved significantly in the first half of the year, reflecting the good progress of the company's LCP soft board related products in downstream mobile phone customers.
Profit forecast and investment advice: We believe that demand in the consumer electronics business is expected to continue to recover, and that automotive connectors will experience a sharp rise in volume and price as the penetration rate of new energy vehicles increases. The company is expected to achieve revenue of 4.491/6.026/7.579 billion yuan in 24-26 years, and achieve net profit of 0.644/0.893/1.145 billion yuan, respectively. The PE corresponding to the market value on August 29 is 20/15/11 times, maintaining the “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations, increased industry competition, and risk of fluctuations in raw material prices.