Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 76.723 billion yuan, +17.15% year over year; realized net profit to mother of 2.832 billion yuan, -63.00% year over year; realized net profit of 1.169 billion yuan without return to mother, or -22.56% year on year. Among them, 2024Q2 achieved operating income of 39.699 billion yuan, +28.33% year over year; realized net profit of 1.674 billion yuan, +145.13% year over year; realized net profit deducted from non-mother of 1.057 billion yuan, +3679.35% year over year.

The gross margin is under pressure, and the cost ratio is well controlled: 2024H1 achieved a gross profit margin of 13.80%, -3.74pct year on year. In terms of the cost ratio for the period, the company achieved a sales expense ratio of 4.01%, -0.68pct year on year; achieved a management expense ratio of 3.16%, -0.31pct year on year; achieved a R&D expense ratio of 3.80%, or -0.73 pct year on year.

H1 sales increased year-on-year, and many new cars are poised for the second half of the year: 2024H1 achieved sales of 1.334 million units, +9.7% year over year; new energy and export sales performed well. Among them, its own brand sold 0.299 million new energy vehicles, +69.9% year on year, and its own brand sold 0.203 million vehicles overseas, +74.9% year on year. 2024H1 has launched a variety of new energy products: sales of the Deep Blue G318 have continued to rise since its launch; UNI-Z was the first to use a new Blue Whale power system, and orders quickly exceeded 10,000 after launch; Changan Hunter, a super extended range pickup truck, has continued to lead the NEV pickup market since its launch. H2 is expected to accelerate product launch, and many new and modified models such as Changan Qiyuan E07, Deep Blue S05, Deep Blue L07, Avita 07, and the fourth-generation CS75PLUS will be launched or released. In terms of intelligence, the company continues to advance the “Beidou Tianshu” program, making every effort to promote the development and application of intelligent technology. With the L3 level traffic jam autonomous driving system equipped with the SL03i, it was approved as the first batch of L3 intelligent connected vehicle pilot units in the country; SDA-S advanced intelligent driving is progressing according to the plan, and mass production will soon be equipped with the Changan Qiyuan E07. In terms of globalization, the “Haina Baichuan” program has been fully launched, and the overseas localization process has been accelerated. Thailand's sales and service channels have covered key provinces such as Bangkok; overseas spare parts center warehouses have been built to enhance overseas service capabilities.

Investment advice: We expect the company to achieve net profit of 7.709/10.494/12.22 billion yuan in 2024-2026. The corresponding PE was 15.24/11.20/9.62 times, respectively, maintaining the “gain” rating.

Risk warning: consumer demand falls short of expectations, industry competition intensifies, sales of new models fall short of expectations, etc.