The performance was in line with expectations. The company achieved operating income of 3.285 billion yuan in the first half of the year, up 14.1% year on year; net profit to mother was 0.42 billion yuan, up 24.0% year on year; net profit after deducting non-return to mother was 0.423 billion yuan, up 14.8% year on year. In the second quarter, revenue was 1.696 billion yuan, up 12.5% year on year, up 6.7% month on month; net profit to mother was 0.225 billion yuan, up 21.7% year on year, up 15.3% month on month; net profit after deducting non-return to mother was 0.218 billion yuan, down 5.4% year on year and up 6.2% month on month.

Gross margin remained steady, and cash flow improved markedly. The gross profit margin for the first half of the year was 28.0%, up 0.1 percentage points year on year; gross margin for the second quarter remained flat year on year, up 0.3 percentage points from month to month. The cost rate for the first half of the year was 12.0%, an increase of 0.1 percentage points over the previous year. Among them, the sales expense ratio decreased by 0.5 percentage points year on year, mainly due to a decrease of 11.59 million yuan in packaging and agency taxes, compounded by the company's revenue growth; the management fee ratio increased 0.4 percentage points year over year, mainly due to the increase in employee remuneration; R&D expenses remained basically flat year on year, and revenue growth led to a 0.7 percentage point decrease in the R&D expense ratio; the financial expenses ratio increased 0.8 percentage points year on year, mainly due to the large exchange rate income of 25.05 million yuan in the first half of last year. 45.53 million yuan. In addition, the company's inventory price drop losses and contract performance cost impairment losses reached 11.75 million yuan in the first half of the year, compared to 0.79 million yuan in the same period last year. Impairment losses had a certain impact on profit side performance in the first half of the year. Net cash flow from operating activities in the first half of the year was $0.42 billion, up 391.8% year on year, mainly due to increased sales revenue.

Traditional businesses maintain their advantages, and rooftop businesses inject new growth impetus. In 2023, the company's sun visor business accounted for 41.9% of the global market share. It is a leading enterprise in the industry segment and has advantages in scale and cost. The company closely follows the rapid development trend of new energy sources, gradually expanding the product line from individual interior parts such as sun visors, headrests, and ceiling central controllers to integrated roof and ceiling systems, increasing bicycle supporting value, and expanding the North American roof business to domestic, European and other markets. It is expected that integrated roof and system products will open up medium- to long-term growth space for the company.

The profitability of the Mexican plant increased, and subsequent roof capacity construction progressed steadily. In the first half of the year, the Mexican plant achieved revenue of 1.838 billion yuan, an increase of 7.3% year on year, and achieved net profit of 40.33 million yuan, an increase of 99.6% year on year. In 2023, the company issued 0.908 billion yuan of convertible bonds, and plans to invest a total of 1.148 billion yuan in the Mexican roof base construction project (estimated annual output of 0.3 million roof system integrated products and 0.6 million car roof products, expected to increase annual revenue of 1.62 billion yuan after delivery, with an average annual net profit of 0.215 billion yuan) and the Zhoushan roof product construction project (estimated to produce 0.7 million sets of ceiling products per year after completion) Annual revenue of 0.49 billion yuan was added, and the average annual net profit was 73.8125 million yuan), and production is expected to be fully achieved in 2025. The new project is adapted to new energy models. The company has already obtained targeted projects from customers such as Tesla, Rivian, GM, and Ford. The release of related production capacity in the future will bring new increases to the company's business, and the profitability of overseas factories is expected to continue to increase.

The gross profit margin, expense ratio, etc. are adjusted to forecast net profit of 0.887, 1.107, and 1.358 billion yuan (originally 0.906, 1.129, 1.394 billion yuan) in 2024-2026, and maintain the average PE valuation of comparable companies in 2024, 21 times the target price of 11.34 yuan, and maintain the purchase rating.

Risk warning

Sales in the passenger car industry fell short of expectations, the penetration rate of NEVs in the North American market was lower than expected, Tesla and other car companies' NEV sales were lower than expected, and the supply volume of passenger car sunshades, headrests, and ceiling products fell short of expectations.