Incident Overview

The company released its 2024 mid-year report. 2024H1 achieved revenue of 8.386 billion yuan, +10.45% year over year; net profit to mother of 2.239 billion yuan, +22.88% year over year; net profit after deduction of 1.903 billion yuan, or +14.27% year over year. Looking at a single quarter, 2024Q2 achieved revenue of 4.583 billion yuan, +7.64% year over year; net profit to mother was 1.309 billion yuan, +20.58% year over year; net profit after deduction was 1.085 billion yuan, +6.40% year over year. Analysis and judgment:

Revenue side: steady growth in main market and rapid development of core business

2024H1's various businesses are developing collaboratively. (1) The electric connection business continues to innovate and upgrade products around consumer needs, and continues to consolidate the company's professional, stylish, and high-end brand image in the field of electrical connections. 2024H1 achieved revenue of 3.87 billion yuan, +5.23% compared to the same period; (2) Smart electrical lighting business. The company is committed to building a smart front-mounted electronics ecosystem centered on smart headlights, including wall switches and sockets, LED lighting, shower bars, circuit breakers, smart door locks, smart clothes dryers, etc., and conforms to the whole house's front-end products Changes in consumption habits are determined to push forward the transformation of the new retail model of offline flagship store+online distribution to meet the needs of consumers for one-stop purchasing+experience. 2024H1 achieved revenue of 4.211 billion yuan, +11.69% year over year; (3) New energy business, relying on the accumulation of electricity technology and brand advantages over the years to quickly complete multiple product lines and channel layouts from 2C to 2B, the 2024H1 achieved revenue of 0.289 billion yuan, +120.22% over the same period last year. In terms of market layout, the company actively explores overseas markets in emerging countries such as Southeast Asia and developed countries in Europe and the United States, and accelerates the global layout of business.

Profit side: cost reduction and efficiency, significant increase in profit

In terms of profitability, the company's 2024H1 gross profit margin of 42.94% (+2.43pct) was due to cost reduction and efficiency. The period rate was 15.28% (+1.87pct), of which the sales rate was 8.00% (+1.05pct) due to increased investment in marketing; the management rate 3.65% (0.16pct) was due to an increase in managers' wages and office expenses; the financial rate -0.72% (-0.01pct) was due to a decrease in interest expenses; and the R&D rate 4.35% (+0.67pct) was due to increased investment in R&D. Net profit margin of 26.68% (+2.70pct) under combined use. 2024Q2 gross profit margin 43.59% (YoY +0.44pct, month-on-month +1.43pct), period rate 15.14% (+1.87pct), net profit margin 28.52% (+3.05pct).

Investment advice

On the basis of consolidating the converter field, the company has successively replicated its competitive advantage into new business fields such as wall opening, LED lighting, digital accessories, and new energy, and is gradually becoming a civilian electrician giant. We are optimistic about the company's subsequent development and maintain the previous profit forecast. The revenue for 2024-2026 was 17.903/20.464/22.922 billion yuan, respectively, and EPS was 3.49/3.98/4.47 yuan (previous value: 5.05/5.77/6.48 yuan), respectively. Changes in EPS were due to an increase in share capital. Corresponding to the closing price of 66.57 yuan/share on August 29, 2024, PE was 19.10/16.71/14.89 times, respectively, maintaining the company's “buy” rating.

Risk warning

New business development falls short of anticipated risks; risk of sharp price increases for raw materials; risk of increased competition in the industry; risk of real estate sentiment falling short of expectations; short-term impact of the epidemic.