Incident: On August 30, 2024, the company released its report for the second quarter of 2024. In Q2, 2024, the company's revenue was 3.12 billion yuan, up 26.74% year on year, up 2.30% month on month; net profit to mother was 0.206 billion yuan, down 7.66% year on year, up 1.13% month on month; net profit without return to mother was 0.209 billion yuan, down 7.66% year on year and 3.22% month on month.

In terms of revenue, the revenue side remained stable in the second quarter of 2024. In terms of core customers, Chery 24Q2 achieved sales of 0.627 million vehicles, up 31.8% year on year and 0.6% month on month; Geely Auto achieved sales of 0.48 million units, up 27.7% year on year, up 0.9% month on month; Ideal Auto achieved sales of 0.109 million units in 24Q2, up 25.5% year on year, up 35% month on month; Tesla 24Q2 delivered 0.444 million vehicles globally, down 4.76% year on year and up 14.77 month on month % The company's revenue side remained stable in the second quarter of 2024, mainly due to the steady sales volume of core customers in the second quarter.

Profitability increased month-on-month, and cost rate control was reasonable. The company's comprehensive gross margin for 2024Q2 was 19.86%, +0.75pcts year-on-year and -0.24pcts month-on-month, and remained stable overall. In terms of cost ratio, the company's expense ratio for the 2024Q2 period was 11.36%, +3.16pcts year over year and -1.04pcts month-on-month. Among them, sales/management/R&D/finance expenses were 1.63%/4.38%/3.73%/1.63%, respectively, and -0.08/-1.10/-0.90/+1.04pcts month-on-month, respectively. Net profit for 24Q2 was 0.21 billion yuan, down 7.66% year on year and up 1.13% month on month. The company's expense ratio is reasonably controlled. The increase in financial expenses was mainly due to exchange gains and losses. The 2024H1 exchange loss was 0.028 billion yuan, and the exchange income for the same period last year was 0.077 billion yuan. The increase in exchange rate brought about part of the net profit.

With a global strategic layout, overseas is expected to become a new growth point. The company is gradually improving its global production capacity layout. On the North American side, Mexico: The subsidiary increased its capital by 95 million US dollars to cultivate the North American market. The Mexican subsidiary is expected to produce 0.25 million instrument panel assemblies and 1.7 million seat back panels. US: The company plans to use its wholly-owned subsidiary Xinquan Singapore to invest 50 million dollars to establish Xinquan American Holdings in Delaware, USA, and Xinquan American Holdings will each invest 4 million US dollars in California to establish Xinquan America Group, and 46 million US dollars to establish Xinquan (Texas) in Texas to establish Xinquan (Texas) internationalization process to accelerate the construction of leading interior and exterior companies. Singapore and Slovakia: Subsidiaries were established in Singapore and Slovakia in September and October 2023. The company continues to promote an international strategic layout, which helps to better serve the company's customers, expand overseas markets, and grasp the development trends and customer needs of the automobile industry in the international field.

Profit forecast: In 2024-2026, the company is expected to achieve revenue of 13.502, 16.653, and 19.718 billion yuan, an increase of 27.71%, 23.34%, and 18.41% year-on-year; in 2024-2026, the net profit to mother will be 1.06, 1.39, and 1.7 billion yuan, corresponding PE is 17, 13, and 11 times, respectively, giving a “recommended” rating.

Risk warning: Competition in the passenger car industry intensifies, sales fall short of expectations; promotion of new products falls short of expectations; risk of rising raw material costs and prices, etc.