Incident: The company achieved revenue of 1.864 billion yuan in the second quarter, up 29.42% year on year, 19.20% month on month, and net profit of 0.593 billion yuan, up 44.12% year on year and 36.86% month on month. Revenue for the single quarter reached a record high.

MLCC production continued to expand, and the share of high-capacity MLCCs continued to increase: the operating rate of the company's high-capacity MLCCs continued to increase in the second quarter and accelerated the expansion of high-capacity products. At the same time, some low-volume production capacity was also shifting to high-capacity. While MLCC's revenue share and high-capacity share increased, gross margin further improved.

Optical communication products such as ferrule and diaphragm boards benefit from increased demand for AI computing power: ferrule socket products benefited from the rapid growth of the downstream server, switch, and optical module industry. Combined with last year's low base, they achieved faster restoration in the first half of 2024. Major customer BloomEnergy continues to break through in the data center fuel cell business, driving the company's fuel cell diaphragm performance to improve quarter by quarter.

The PKG, substrate, paste and other businesses are recovering quarterly with the consumer electronics industry: with the recovery of the company's downstream crystal oscillators, ceramic resistors, etc., the operating rate of related pkg, substrate, and paste businesses increased simultaneously, driving further improvements in related business revenue and gross margin.

Investment proposal: We expect the company to achieve operating income of 7.395/8.835/10.39 billion yuan and net profit to mother of 2.142/2.527/2.999 billion yuan in 2024-2026. The corresponding PE was 27.17/23.04/19.41 times, respectively, maintaining the “gain” rating.

Risk warning: risk of MLCC sales falling short of expectations; risk of falling demand for high-capacity products; risk of price cuts for other competitors such as Samsung.