Interim results: In '24, H1 achieved revenue of 0.438 billion yuan, yoy +54.9%; net profit to mother of 0.055 billion yuan, yoy +223.7%; net profit of 0.044 billion yuan after deducting non-net profit of 0.044 billion yuan, reversing year-on-year losses. Among them, Q2 achieved revenue of 0.238 billion yuan, yoy +50.6%, +19.3% month-on-month; realized net profit to mother of 0.039 billion yuan, yoy +158.9%, or +150.3% month-on-month.

Demand for consumer electronics recovered, increased sales of nickel powder and improved product structure drove profit improvement on the revenue side. The company's 24Q2 revenue was +50.6% year-on-year, and +19.3% month-on-month, mainly due to the continued recovery of the downstream consumer electronics market. Sales of nickel powder and copper powder used in MLCC increased sharply year on year, and the product structure also improved. On the profit side, the company's 24H1 gross profit margin was 21.89%, Q2 gross profit margin was 24.5%, +5.7pcts month-on-month, and continued to rise since 23Q4. On the raw material side, the average price of 24H1 nickel is 0.137 million yuan/ton, yoy -26%. The downward shift in the raw material price center helped restore the company's profitability. On the cost side, the cost rate during Q2 was 7.4%, -4.9pcts month-on-month, mainly due to a decrease in the management cost rate and R&D cost rate. The reduction in raw material costs, combined with product structure improvements and fine management and implementation, promoted a significant improvement in the company's profitability. Q2 recorded a net interest rate of 16.4%, +8.6pcts compared to the previous month. At the same time, the company's high-priced nickel removal effect was remarkable, and cash flow improved drastically at the same time. 24H1's net operating cash flow reached 0.19 billion yuan, yoy +213%.

The MLCC industry has begun a new cycle of growth. It is expected that demand for high-end nickel powder will continue to boost demand for high-end nickel powder. The MLCC industry will gradually bottom out in 23 years, and inventories will return to a healthy level. Over the past 24 years, the consumer electronics market has continued to recover. At the same time, the trend of highly functional AI application terminals has driven consumer electronics into a new growth cycle. Demand for small-particle nickel powder for high-end MLCCs has increased, and sales and capacity utilization in the MLCC industry have increased dramatically. 24Q2 Japan's Murata MLCC's revenue was 20.3 billion yen, yoy +20%, and the capacity utilization rate was 80%-85%. The president of Murata Manufacturing expected Q3 to increase to 85%-90%; the company's largest customer, Samsung Electric's MLCC revenue was 10.6 billion won, yoy +16.6%, with high added value and automotive MLCC gradually increasing. Entering Q3, we expect the MLCC industry to usher in continued growth with the launch of new models, the continued growth of the AI market, and the gradual launch of automotive MLCCs. At the same time, high-performance MLCCs are expected to boost the company's demand for high-end nickel powder.

PVD empowers platform-based development and waits for new products to flourish

The company has the core competitiveness of underlying technology platformization, and the PVD milling process enables the horizontal expansion of high-end powders. In addition to traditional products such as nickel powder and copper powder, the company has developed a variety of new HJT silver coated copper powder products with good conductivity and low silver content. Industrialization of silver-wrapped copper powder is expected to accelerate as silver prices rise sharply; various soft magnetic alloy materials, silicon powder, and silicon alloy powder are all in the sample delivery and evaluation stage. As the application scenarios of powder materials continue to expand under new technology trends, the company's platform-based advantages are expected to continue to show.

Investment suggestion: As the leader of the domestic MLCC nickel powder, the company's performance is expected to continue to improve along with the gradual completion of the consumer electronics industry chain and the strong development of the automotive electronics market. The net profit for 2024-2026 is expected to be 0.124/0.172/0.228 billion yuan, respectively (the value was 0.085/0.145/0.204 billion yuan 24-26 years ago, considering the pace of recovery in the MLCC industry and raising the profit forecast), corresponding to the closing price PE on August 30 is 45/ 32/24 times, maintaining a “buy” rating.

Risk warning: risk of demand fluctuations; risk of increased industry competition; risk of exchange rate fluctuations; risk of fluctuations in raw material prices; risk of high customer concentration; risk of intellectual property litigation.