Profit base pressure released, export performance was outstanding

Lake Electric released its semi-annual report. In 2024, H1 achieved revenue of 4.75 billion yuan (yoy +15.49%), net profit of 0.602 billion yuan (yoy +1.32%), deducting non-net profit of 0.594 billion yuan (yoy +7.27%). Among them, Q2 achieved revenue of 2.437 billion yuan (yoy +19.35%) and net profit of 0.331 billion yuan (yoy -16.25%) to mother. The traditional main business recovered as scheduled, and we maintained the company's 2024-2026 EPS of 2.19, 2.52, and 2.88 yuan respectively. Comparatively, the company's 2024 Wind unanimously anticipated an average PE value of 13 times. In view of the company's accelerated overseas growth, the company was given 14 times PE in 2024, maintained a target price of 30.66 yuan, and maintained a “buy” rating.

Traditional main businesses continued to pick up, and overall revenue achieved double-digit growth

By business, revenue from 24H1 clean and healthy appliances and garden tools was 2.688 billion yuan, of which revenue from the home appliance export business and cross-border e-commerce business both increased by more than 30% year-on-year (24Q1: about 20%); revenue from motors, new energy vehicle parts and other components was 1.955 billion yuan. Among them, the core components business continued to grow steadily, with revenue increasing by more than 10% year on year, of which motor business revenue increased by more than 20% year on year.

Exchange profit and loss fluctuate greatly, and the profitability of the main business is relatively stable

24H1's gross margin was 24.9%, -2.37pct year on year, mainly due to rising raw material prices.

On the cost side, the sales expense ratio for the same period was 4.42%. -2.04 pct year over year was mainly due to a decrease in marketing expenses for independent brand business; the gross sales margin was 20.48%, -0.33 pct year on year. In addition, the company's financial expense ratio was -3.34%, -2.64pct year over year. This was mainly due to a decrease in exchange earnings (of which 24H1 exchange revenue was 0.076 billion yuan, -60% year over year). Based on the exchange earnings performance in each quarter of last year, we believe that the pressure on the company's exchange earnings base has been concentrated in the second quarter. Ultimately, the company's 24H1 net margin was 12.68%, -1.78pct year-on-year.

Accelerate the global production capacity layout and strengthen external circulation

In order to further expand international business and respond positively to the national “Belt and Road” initiative, the company continued to accelerate the construction of overseas manufacturing bases in 2023 to better meet the order needs of international customers. Construction of the Thai factory began in June 2023 and was completed in the first quarter of 2024. Currently, some production lines have entered the trial production stage. The gradual commissioning of production capacity at the Thai production base has enriched the company's global service network and provided strong support for the company's overseas business development.

Risk warning: risk of falling overseas demand; risk of weak diversified business performance; exchange rate risk.