Event: On August 20, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.653 billion yuan, a year-on-year increase of 4.04%; net profit to mother was 0.09 billion yuan, a year-on-year decrease of 9.82%.

24 Revenue achieved steady growth in the first half of the year, and R&D innovation helped upgrade products. In the first half of 2024, the company achieved operating income of 0.653 billion yuan, a year-on-year increase of 4.04%; net profit to mother was 0.09 billion yuan, a year-on-year decrease of 9.82%. This is because with investment in refinancing project construction and technological transformation, the company's capital expenditure and fixed assets have increased dramatically in the past two years, resulting in large fixed asset depreciation and amortization expenses. At the same time, the company accrued interest expenses on convertible bonds of 14.9736 million yuan in the first half of the year, resulting in a year-on-year decrease in net profit to mother. The company continues to promote R&D innovation and help optimize the product structure. In the first half of 2024, the company invested 25.3346 million yuan in R&D. In terms of product applications, the downstream applications of the company's products were mainly in the fields of industrial control and automotive electronics, accounting for more than 80% of total revenue in the first half of 2024. The company continues to strengthen technical cooperation with customers in product development, and has successively developed high-frequency high-speed boards for communication, embedded copper block power substrates with high current and high heat dissipation for new energy vehicles, metal substrates, rigid-flex boards, and products used in millimeter wave radar, lidar, etc., to create a multi-level product structure and provide a full range of product services.

Deeply involved in the fields of industrial control and automotive electronics, and steadily advance the global layout. The company has a wide variety of PCB products. In addition to single/double panels and multi-layer boards, the product types cover HDI boards, thick copper plates, ceramic substrates, rigid-flex boards, high-frequency high-speed boards, etc. 1) Industrial control field: Products are mainly used in servo motors and servo drives, industrial radios, industrial power supplies, industrial robots, CNC machine tools, etc. The main customers are mainly well-known Japanese industrial control companies, including Hitachi, Panasonic, Omron, Yaskawa Electric, and Sanyo Electric. 2) In the field of automotive electronics: Through long-term cultivation in the automotive PCB market, the company gradually moved from car keys, headlights, antennas and in-vehicle entertainment systems to important safety components such as ECUs, T-BOXs, steering motors, lidars, engine control panels, etc., and has established cooperative ties with many EMS car manufacturers and terminals. At the same time, the company has a presence in the fields of communication equipment, medical devices, and IC testing and optical modules. It has successfully developed an 80-layer IC test board, which is expected to usher in rapid development space. In addition, the company's products have been mainly exported for a long time. Export revenue in 2023 was 0.793 billion yuan, up 10.54% year on year, accounting for 60.34% of business revenue. The company set up sales companies in Hong Kong, Japan, etc., and set up a production base in Thailand in 2023 to strengthen the company's overall competitive strength. Throughout 2024, the company said it will accelerate the construction of the Thai factory, respond to the PCB industry shift trend, and continue to adhere to the global layout.

Profit forecast and investment rating: We expect the company's net profit to be 0.215/0.245/0.295 billion yuan in 2024-2026, and the current stock price corresponding to PE is 14/12/10 times, respectively. We believe that 1) With the rapid development of new energy vehicles, the company continues to cultivate deeply in the field of automotive electronics and has accumulated a certain competitive advantage. 2) The company has high-quality customer resources and has established stable collaborative development partnerships with leading customers in the industry such as Panasonic, Omron, and Yaskawa Electric. 3) The company has established product manufacturing and quality control capabilities with global competition, set up sales companies in Hong Kong, Japan, etc., and also set up production bases in Thailand, which can respond quickly to overseas customer needs. Therefore, we are optimistic about the company's future performance development, covered for the first time, and gave it a “buy” rating.

Risk warning: risk of macroeconomic fluctuations; risk of fluctuations in raw material prices; risk of exchange rate fluctuations; risk of new product development falling short of expectations.