The Q2 results are in line with market expectations. The company's H1 revenue in '24 was 23.9 billion yuan, an increase of 7%; net profit to mother was 0.82 billion yuan, an increase of 88%. Gross profit margin 16.6%, up 2.1 pct, net profit margin 3.4%, 1.5 pct; of these, 24Q2 revenue was 12.9 billion yuan, +10%/+18% year-on-month, net profit 0.51 billion yuan, year-on-month, -16%/+59%, gross profit margin 16.6%, +1.5/+0.1pct, net profit margin 3.9%, year-on-month, -1.2/+1.0pct. The performance was low in the median forecast, in line with market expectations.

Consumption of lithium batteries performed well, and the self-supply rate of batteries rose to 35%. Consumption H1's revenue was 13.2 billion yuan, down 1%; shipments were 0.26 billion yuan, up 13%; gross profit margin was 18.1%; the same increase was 4.1 pct. Consumption H1 contributed 1.16 billion yuan in profit, exceeding market expectations. Lithiway H1's revenue was 3.1 billion yuan, up 34% from the same period. The battery self-supply rate rose to 35%, continued to expand downstream customers, and the consumer business is expected to grow 10% + in 24 years. On the industry side, consumer electronics continues to recover, AI brings an increase in battery capacity, and we expect the growth rate to increase further. Furthermore, the trend of cell+pack integration is clear. With the advantages of the Pack side, the company is expected to make full profits in the future. We expect consumption to contribute 2.3 billion yuan in profit throughout the year, an increase of 37%.

Mobile storage customers continue to expand, and shipments are growing faster than the industry. Mobile storage battery H1 revenue was 6.2 billion yuan, up 20%, and shipments of 8.5 GWh were increased by about 70%, of which 8.3 GWh of power, 0.98 GWh of energy storage, a gross profit margin of 11.7%, a decrease of 1.7 pct, the impact of changes in accounting standards was 2%; the revenue of the energy storage system H1 was 0.59 billion yuan, with a gross profit margin of 28.1%, an increase of 12.1%, and shipments of 3.8 GWh. The company's downstream customers continue to expand. The company expects 20-25 GWh of power shipments and 7-8 GWh of energy storage systems throughout the year, doubling year-on-year, higher than the industry's growth rate. Moving Savings H1's equity loss was 0.34 billion yuan, of which Q2 was flat month-on-month, corresponding to a loss of 0.08 yuan per wh. Compared with Q1, H2 is expected to lose 0.02 yuan. As capacity utilization increases, H2 is expected to lose 0.6 billion yuan in equity. We expect the annual equity loss to be 0.6 billion yuan, which is a slight contraction over the previous year.

Expense rates have declined, and cash flow has increased dramatically. Expenses for the 24H1 period were 3.2 billion yuan, an increase of 17%, an expense ratio of 13.3%, and an increase of 1.0 pct, of which the 24Q2 period cost 1.6 billion, +46%/-2%, cost ratio 12.2%, +3.0/-2.4pct; 24H1 company's net operating cash flow was 1.7 billion yuan, an increase of 267%, of which 24Q2 net operating cash flow was 1 billion yuan, +396%/+44% year-on-year; H1 capital expenditure for 24 years 3.3 billion yuan, an increase of 5% over the same period. Capital expenditure in Q2 was 1.3 billion yuan, +5%/-32% YoY; inventory at the end of 24Q2 was 7.4 billion yuan, a slight decrease from the end of Q1.

Profit forecast and investment rating: We basically maintain a 24-26 net profit forecast of 1.8/2.1/2.5 billion yuan (previously 1.7/2.1/2.5 billion yuan), +63%/+20% compared to the same period, corresponding PE of 17/14/12x, respectively. Considering that the company's power shipments are expected to increase rapidly, we gave 25xPE in 24 years, corresponding to a target price of 23.5 yuan, maintaining a “buy” rating.

Risk warning: Electric vehicle sales fell short of expectations, and industry competition intensified.