Key points of investment

The performance is in line with expectations. The results for the second half of the year are expected to be better released. In the first half of 2024, the company achieved revenue of 3.172 billion yuan, an increase of 42.63% over the previous year, and net profit to mother of 0.173 billion yuan, an increase of 161.92% over the previous year, after deducting net profit of 0.161 billion yuan.

Looking at Q2 alone, the company achieved revenue of 1.643 billion yuan, a year-on-year increase of 27.66%, a month-on-month increase of 7.46%, and net profit to mother of 0.087 billion yuan, an increase of 71.33% year-on-year and 0.06% month-on-month. After deducting net profit of 0.079 billion yuan, a year-on-year increase of 61.61% year-on-year and a decrease of 3.02% month-on-month.

Connectors: Benefiting from increased demand for servers and data centers in the first half of the year, the connector business achieved revenue of 1.114 billion yuan, accounting for 35.11% of revenue, up 40.16% year on year. Among them: communication connector product revenue was 0.469 billion yuan, up 0.39% year on year, consumer electronics connector product revenue was 0.155 billion yuan, up 34.65% year on year, and revenue from other connector and component products was 0.489 billion yuan, up 130.84% year on year.

The company's connector business benefited from increased demand for domestic servers and data centers, and orders increased year-on-year in the first half of the year. Among them, the company was one of the few domestic companies to achieve mass production in the field of high-speed connectors, and it is expected that it will continue to benefit from the release of downstream demand and the expansion of product lines in the future.

Solar brackets: The release of overseas production capacity+shipping pressure is expected to ease. In the first half of the year, the solar bracket business achieved revenue of 1.932 billion yuan, accounting for 60.92% of revenue, an increase of 41.13% over the previous year. As an important supplier to major customers such as NexTracker, GCS, and FTC Solar, the company is expected to continue its rapid growth trend in the future as overseas production capacity is released and shipping pressure gradually eases.

Cost reduction and fee control effects are remarkable, and profitability has improved

In the first half of the year, the company's overall gross margin was 18.76%, up 1.48pp year on year, net profit margin 5.85%, up 3.63pp year on year. The gross margin of the connector business was 32.78%, up 2.25pp year on year, and the gross margin of the solar bracket business was 11.94%, up 1.79pp year on year. The company's fee control effect was remarkable. The overall cost rate decreased by 1.0pp to 10.97% during the first half of the year.

Profit forecasting and valuation

As overseas production capacity climbs and downstream demand improves, the company's performance is expected to grow rapidly. The company's 2024-2026 revenue is expected to be 6.86, 8.51, and 10.01 billion yuan, up 35.6%, 24.1%, 17.6% year on year, and net profit to mother of 0.37, 0.48, 0.59 billion yuan, up 203.0%, 29.7%, 22.4% year on year, corresponding to PE 19.0, 14.6, 11.9 times, maintaining the “buy” rating.

Risk warning

Shipping capacity is tight; order release falls short of expectations; risk of international trade conflicts; product development falls short of expectations, etc.