1H24 results are in line with our expectations

The company 1H24 achieved revenue of 1.576 billion yuan, up 37.27% year on year; net profit to mother was 0.179 billion yuan, up 99.31% year on year; deducted non-net profit of 0.158 billion yuan, +223.43% year on year; gross profit margin was 52.33%, 0.8 pcts year on year; sales and management expenses ratio accounted for -0.8/-0.5 pcts year on year, respectively; performance growth was mainly due to the company increasing investment in industrial and automotive electronics, developing new customers and developing markets, improving cost control, etc. Factors, the performance was in line with our expectations.

Development trends

2Q24's performance grew at the same rapid pace, with both revenue and profit margins of the power management products business increasing. 2Q24's revenue was 0.847 billion yuan, up 33.4% year on year; 1H24's power management product revenue was about 1.038 billion yuan, accounting for about 65.9% of total business, revenue up 46.3% year on year, gross margin was 49.8%, up 3.8 ppts year on year; the company's signal chain business revenue was about 0.538 billion yuan, accounting for about 34.1%, up 22.66% year on year, and gross margin was 57.3%, down 3.21 ppts year on year. We believe that the company's 2Q24 performance growth was mainly driven by the release of power management chips. Due to the company's product structure optimization and cost control, future profitability is expected to continue to improve.

The company has a rich product matrix and continues to launch new products in the field of automotive electronics. According to the company announcement, the company has a total of 5,200 products in 32 categories, and has obtained a total of 265 invention patents. Some of the product performance indicators are superior to foreign competitors. The company's core technology products include high-power motor driver chips, high-performance charge pump chips, AMOLED display power supply chips, high-precision ADCs, etc.; in the automotive field, the company continues to launch high-performance automotive-grade products such as flash LED drivers, synchronous step-down chips, automotive-grade LDO chips, and ultra-low internal resistance power MOSFETs. We believe that the company will continue to launch new products in automotive electronics and other fields, optimize the product structure, and open up more market space.

Continue to invest in R&D capabilities, expand product lines, and increase market share. 1H24's R&D expenses were 0.418 billion yuan, up 19.63% year-on-year, accounting for 26.5% of revenue. According to the announcement, the company currently has 1,085 R&D personnel, accounting for 73.06% of the total number, and 372 employees working on integrated circuits with more than 10 years of experience. The core R&D team is stable and investment continues to increase steadily.

We believe that the company is expected to continue to promote product optimization and innovation, and gain an advantage in rapidly growing application fields such as computing and automobiles.

Profit forecasting and valuation

We basically keep the company's revenue and net profit forecast unchanged for 2024/2025. 2024E/2025E revenue is expected to reach 3.25/4.05 billion yuan, and net profit to mother is expected to reach 0.53/0.74 billion yuan. Maintain an outperforming industry rating. We maintain the company's target price of 99.59 yuan, which corresponds to 45 times P/E in 2026. The current stock price corresponds to 32.9x P/E in 2026, and the target share price has 36.9% upside compared to the current stock price.

risks

Downstream demand falls short of expectations; customer introduction falls short of expectations; technology research and development falls short of expectations.