Incident: The company released its 2024 semi-annual report, achieving operating income of 11.08 billion yuan, YoY +11.83%; net profit to mother of 0.323 billion yuan, turning a loss into a profit; and 0.316 billion yuan after deducting non-net profit. Looking at the second quarter, the company achieved operating income of 5.798 billion yuan, YoY +10.1%, QoQ +9.77%; net profit to mother of 0.224 billion yuan, QoQ +127.6%; deducted non-net profit of 0.222 billion yuan, QoQ +134.82%. The company's performance is in line with the forecast range.

Key points of investment:

Various factories have recovered significantly, and construction of major projects is progressing steadily. According to the announcement, 1) Nantong Tongfu: 24H1 achieved revenue of 0.973 billion yuan, YoY +6.46%, and loss of 0.109 billion yuan, of which the mechanical and electrical installation and renovation of the first floor 2D+ project of Nantong Tongfu and the mechanical and electrical installation and renovation of the second floor SIP construction project of Nantong Tongfu were completed in one go; 2) Hefei Tongfu: 24H1 achieved revenue of 0.465 billion yuan, YoY +15.96%, loss 0.038 billion yuan; 3) Tongfu Chaowei Suzhou and Tongfu Chaowei PENANG:

As an AMD core packaging and testing plant, 24H1 achieved total revenue of 7.178 billion yuan, YoY +4.61%, and net profit of 0.585 billion yuan. In the first half of the year, the company was carrying out electromechanical installation work at Tongfu Chaowei's new factory in Suzhou, construction of a bump production line at Tongfu Chaowei's new factory, and advanced packaging production line construction at the new Penang plant; 4) Tongfu Tongke: The new base for MCU and power device products grew rapidly. 24H1 achieved revenue of 0.324 billion yuan, YoY +140% , a loss of 0.091 billion yuan.

Various types of business are growing steadily. According to the announcement, in terms of the consumer market, the company continues to seize recovery opportunities in the mobile phone and consumer markets. The market for traditional framework products is stable, and revenue continues to increase. In terms of emerging markets, domestic alternatives to the RF product market are breaking ground. The company is seizing the opportunity, and products such as RF modules and communication SOC chips with system-level (SiP) packaging technology continue to increase in volume and continue to expand the market size. At the same time, memory, display drivers, and FC product lines have also shown strong growth momentum, maintaining rapid growth of over 50%, showing the strong market competitiveness and production efficiency of emerging product lines. In the advanced packaging market, the company continues to develop large-scale, high-computing power products in the server and client markets. Relying on years of cooperation and first-mover advantage with leading companies in the industry such as AMD, the company's high-performance packaging business maintained steady growth in the first half of the year based on the continuous growth in demand for high-end processors and AI chips. At the same time, as opportunities for innovation in the AI+ industry increase, the industrialization of artificial intelligence has entered a new stage. The company is actively expanding production at the Penang plant in line with the requirements of leading customers such as AMD during the period of opportunity for artificial intelligence development to meet customer needs in all aspects.

The acquisition of Jinglong strengthened the testing process. According to the announcement, 24H1 plans to acquire 26% of Jinglong Technology's shares in cash of 1.378 billion yuan (tax included). Jinglong Technology has a differentiated competitive advantage in the field of high-end integrated circuit professional testing. The service areas include CP/FT testing and wafer grinding/cutting/grain picking. The product line covers Memory, Logic & Mixed-Signal, SOCCIS/CCD, LCD Driver, RF ireless. The total number of test machines has exceeded 1000, and the test scale driving IC.eFlash has reached an advanced position in China. Through this acquisition, the company is expected to further enhance its competitive advantage in the testing process and increase the company's return on investment.

The profit forecast was raised and the “increase in holdings” rating was maintained. According to the company's semi-annual report on each factory business, we raised the 24-26 net profit forecast to 0.879/1.087/1.402 billion (the original forecast was 0.816/1.064/1.329 billion), corresponding to the 24-26 PE to 34/28/22X, maintaining the “gain” rating.

Risk warning: orders from major customers fall short of expectations; industry sentiment falls short of expectations; supply chain risks.