Incident: The company released its 2024 semi-annual report: in the first half of 2024, the company achieved revenue of 27.079 billion yuan, a year-on-year increase of 0.24%; achieved net profit of 0.637 billion yuan, an increase of 33.91% over the previous year; achieved net profit deducted from non-mother of 0.639 billion yuan, an increase of 61.20% year-on-year.

Performance growth is in line with expectations, and profitability continues to improve. 24Q2 achieved revenue of 13.801 billion yuan, +0.06% year over year; realized net profit of 0.33 billion yuan, +19.96% year over year; realized net profit deducted from non-mother 0.327 billion yuan, +24.33% year over year. The company's revenue growth was due to the continuous volume of orders from major domestic and foreign customers, and various businesses maintained steady growth. The business segment was split. As of July 2024, the total lifetime value of the company's new orders had exceeded 63 billion yuan, including the automotive safety business received more than 45 billion yuan, and the automotive electronics business received more than 18 billion yuan.

Profit margins continue to be optimized, and scale effects are evident. 24Q2 achieved a gross sales margin of 15.50%, +1.65pct/-0.01pct month-on-month, respectively; achieved a net sales margin of 3.31%, and +1.08pct/+0.45pct month-on-month, respectively. Split cost rates, 24Q2 sales/management/R&D/finance expenses were 0.89%/4.33%/3.80%/1.50%, respectively, -0.20pct/-0.26pct/-0.75pct/-0.09pct, respectively. By product, the gross margin of the automobile safety business in the first half of '24 was 13.94%, an increase of 3.3 pct over the previous year. As business continues to improve in Europe and America, the profitability of the automotive safety business continues to increase; the gross margin of the automotive electronics business is 19.37%, which is relatively stable.

Expanding the automotive electronics category and boosting the intelligent racetrack. The company's business category has been expanded. In the fields of intelligent driving, smart cockpit/connectivity, and intelligent body area, the company has acquired new UWB technology services (digital keys, cockpit live detection, etc.) and ADAS L2 Smart Camera (front-view all-in-one) business. In terms of vehicle-road cloud collaboration, the company already has vehicle-side protocol stacks, OBU (on-board units), RSU (roadside units), MEC (mobile edge computing), and Cloud (cloud platform) technologies based on 5G+C-V2X technology to build a fully connected transportation ecosystem.

The profitability of the automotive safety business is improving, and it is expected that it will continue to improve and enhance its performance. The company reduced costs and increased efficiency, and effectively increased the profit margin of the automobile safety business by gradually unifying the global procurement system, automating production line balance, and strengthening global production capacity collaboration. At the same time, the company develops foldable wire-controlled steering wheels and ceiling-mounted passenger airbags for future autonomous driving, flying airbags adapted to the large screens of smart electric vehicles, and smart steering wheels to enable future growth.

Investment advice: The company has plenty of orders in hand. We expect the company's revenue in 2024-2026 to be 59.42/64.55/69.46 billion yuan, corresponding to net profit of 1.46/1.93/2.22 billion yuan, and the current market value corresponding to 2024-2026 PE is 13.8/10.4/9.1 times, maintaining a “buy” rating.

Risk warning: Prices of raw materials have risen, production capacity has fallen short of expectations, customer expansion falls short of expectations, and sales of new energy vehicles have fallen short of expectations.