The company discloses its 2024 interim report:

24H1: revenue 1.1 billion (+0.8%), net of 0.011 billion (-85%), deducted of non-0.013 billion (-61%) 24Q2: revenue 0.64 billion (+4%), -0.034 billion (-155%), after deducting non-0.013 billion (-72%) of the company's profit decline was affected by the subsidiary GDC (previously announced plans to divest). Excluding GDC arbitration and loss effects, the company's H1 profit was 0.07 billion yuan, deducted not 0.036 billion, which was basically in line with expectations.

Furthermore, in order to enhance investor confidence, the company announced a new repurchase of 0.02-0.03 billion yuan (approximately 0.2%-0.29% of total share capital) and plans to cancel 0.006 billion shares (1.26% of total share capital) from the previous repurchase account.

H1 performance overview: The main business is on track. Watching the GDC adjustment progress, the company's Q2 revenue is growing. The main contribution comes from a sharp rise in Q2, the main line of core growth, the automotive business, which effectively makes up for the revenue gap caused by the decline on the C side; however, due to GDC's drag down, the apparent profit is weaker than the actual quality of operations.

① Vehicle 24Q2 revenue was about 0.2 billion. Compared with the same period last year, it was a net incremental business, accounting for about 30% of Q2 revenue, and has become the main pillar of subsequent growth. As the M9 order has entered an intensive mass production delivery period, the company's Q2 vehicle revenue has increased significantly compared to Q1, and in August '24, the company's other model, the Enjoy S9, entered the delivery period, and subsequent increases can be expected; on the profit side, the automotive business has gradually gone through the early development period, and we expect the automotive business to contribute positively to profits throughout the year.

② The rest of the main business: C-side impact is gradually manageable, and B-side business is basically stable. As the C-end downstream boom was damaged, the company continued to reduce costs and increase efficiency. The C-end company Fengmi Technology continued to reduce losses, and the impact of H1 on the net profit of the return home was narrowed to the level of 10 million. In the B-side business, cinemas are still maintaining a strong cash position, and exclusive displays are also growing steadily, but core devices such as optoelectronics are still expected to be affected to a certain extent by fluctuations in the downstream economy.

③ GDC impact: Q2 was evident, and adjustments are expected to be completed within the year. GDC is a planned asset divestment announced by the company in April. The purpose of the divestment is to control and reduce uncertainty about long-term development. 24H1GDC confirmed that 0.018 billion in litigation costs and related asset reclassifications caused non-recurring profit and loss of approximately 0.037 billion. We expect the costs associated with the reclassification to be concentrated in Q2, and the subsequent impact will narrow; however, lawsuits and GDC's own losses may still have a continuing impact. It is expected that the company will adjust and complete related matters within the year to reduce the operating burden.

Investment advice: buy ratings

The actual quality of the company's operations met expectations in H1. Vehicles have entered the revenue verification period, and profitability is expected to continue to improve; the C-side has passed the period of greatest pressure and has now steadily reduced losses. However, the GDC incident disrupted the company's profit release pace, and Q2 was the most obvious, affecting apparent performance; it is expected that the subsequent divestiture of the business will be carried out lightly. Furthermore, the company is currently planning to launch a new repurchase and cancel the previous repurchased shares, which will also increase earnings per share to a certain extent.

Considering the impact of GDC, we expect the company's 24-26 profit of 0.08, 0.27, and 0.37 billion (0.15, 0.29, 0.39 billion 24-26 years ago), corresponding to PE88, 25, 29x. Maintain a buy rating.

Risk warning: GDC divestment progress falls short of expectations, automotive performance falls short of expectations, and the downstream business climate fluctuates