The profit growth rate is affected by R&D investment in stages, and the oscilloscope sector structure continues to be optimized

In the first half of 2024, the company achieved operating income of 0.31 billion yuan, a year-on-year decrease of 1%, and net profit to mother of 7.65 million yuan, a year-on-year decrease of 83%. In 2024, the company's revenue in Q2 was 0.16 billion yuan, up 1% year on year, and net profit to mother was 1.34 million yuan, down 94% year on year. The decline in profit was mainly due to continued growth in R&D investment. By business, in the first half of 2024 (1), digital oscilloscopes: the proportion of autonomous and controlled products continued to increase, and new products were released rapidly. Oscilloscope products equipped with the company's self-developed core technology platform accounted for 78% of sales, an increase of 5 pct over the previous year, and sales revenue of DHO series high-resolution digital oscilloscopes increased 201% year over year. (2) Sales revenue of power and electronic load products increased 20% year on year; (3) sales revenue of durable electronics increased 748% year on year. Looking ahead to the second half of the year, the company's performance is expected to improve sequentially: (1) orders of about 26.28 million yuan in the first half of the year were affected by logistics and other factors, and revenue confirmation was delayed until Q3; (2) not including delayed order confirmation. According to the company's preliminary statistics, July revenue grew by more than 33% year on year; (3) Endurance Electronics is full of orders in hand, and is expected to accept 69.32 million yuan in 24 years.

The gross margin is rising steadily, and the four-fee phased increase affects the net interest rate

In the first half of 2024, the company's gross sales margin was 56.7%, an increase of 1.1 pct over the previous year. The company's net sales margin was 4.9%, a year-on-year decrease of 9.9pct. The company's expenses rate for the first half of 2024 was 64.7%, up 17.6pct year-on-year. Among them, the sales/management/R&D/finance expense ratios were 17.9%/15.4%/28.6%/2.8%, respectively, up 0.7/5.0/7.7/4.3pct. The cost rate increased dramatically during the period, mainly due to (1) the company actively increased investment in R&D and continued development of new products; (2) the increase in management and functional personnel; the accrued depreciation of subsidiary plants and usage rights assets that have not yet been officially put into use (3) the high exchange earnings base last year.

Equity incentives bind core employees, demonstrating confidence in growth

In the first half of 2024, the company announced a restricted stock incentive plan to grant 76 key employees a total of 1.8 million shares, accounting for 0.97% of the total share capital. The incentive plan is divided into categories 1 and 2. The number of Class 1 restricted stocks is 0.7 million shares, and the second type of restricted stock is 1 million shares. The shares all come from fixed increases or repurchases. The incentive plan assesses the company's performance indicators on an annual basis. The assessment period is 2024/2025. The trigger values are a 15% year-on-year increase in revenue or a 10% year-on-year increase in net profit; the target values are all 20% year-on-year increase in revenue. Or net profit increased 20% year over year. The equity incentive plan binds the company's core employees, demonstrating confidence in growth.

Profit forecast and investment rating: Based on prudential considerations, we adjusted the company's 2024-2026 net profit forecast to be 1.1 (original value 1.6) /1.3 (original value 2.1) /1.8 (original value 2.6) billion yuan. The current market value corresponds to PE of 58/48/36 times. The company is in a mismatch between early layout and investment period of new product development and investment period, short-term cost calculation and revenue fulfillment.

Following the replacement of domestic electronic measuring instruments, the company's new products were launched, and the performance growth rate is expected to recover, maintaining the “gain” rating.

Risk warning: geopolitical risk, rising raw material prices, risk of exchange rate fluctuations