The company announced its 24 semi-annual report, with revenue of 0.65 billion +28.1% year on year, net profit of 0.09 billion plus 29.1% year on year after deduction of 0.07 billion year on year, gross profit margin of 31.2% year on year +3.2 pcts year on year, net profit margin 14.5% year on year +0.1 pcts year on year, and a significant increase in R&D/sales expenses. Our review is as follows:

The 24H1 automotive electronics business continues to grow rapidly. By sector, the automotive electronics sector's revenue was 0.34 billion, accounting for 52.7% of revenue; the smart consumer sector had revenue of 0.15 billion, accounting for 23.7% of revenue; the communications sector had revenue of 0.087 billion, accounting for 13.5% of revenue; the medical and personal care sector had revenue of 0.015 billion, accounting for 2.4% of revenue; and revenue from other sectors was 0.05 billion, accounting for 7.7% of revenue. Among them, the automotive electronics business continued to grow at a rate of 33% year-on-year.

Q2 The pressure on performance was mainly hampered by poor demand for MR products. Single Q2, revenue 0.33 billion +18.2% month-on-month +6.5%, net profit to mother 0.04 billion -13.5% month-on-month, -7.3% month-on-month -35.9%, gross profit margin 29.7% yoy +0.9pcts month-on-month -3.1 pcts, net profit ratio 11.6% yoy -4.2pcts month-on-month, period expense ratio 22.0% yoy +7.2pcts month-on-month +5.0pcts month-on-month.

The company's Q2 profit declined significantly month-on-month. Mainly, MR order revenue from customer A was mainly reflected in the first quarter, but subsequent demand in the second quarter was poor. If MR products are excluded, the performance of other businesses such as automotive electronics is expected to remain good. The year-on-year decline is mainly due to a sharp increase in R&D expenses, and the R&D cost ratio is +3.4 pcts year over year.

The automotive electronics business will grow in volume in 24/25, and is expected to enter the field of humanoid robots through micromotors. In terms of automotive electronics, it is expected to maintain a medium- to high-speed growth trend in the future with the continuous mass production and launch of many categories such as vehicle screen actuators, automobile thermal management actuators, electronic parking, automobile active lift and tail actuators, and automobile hidden door handle driving systems. In terms of robots, the company's micro transmission and micro drive system products are highly compatible with the motion control requirements of the robot field due to their high-precision motion control, high torque output, and compact size; the humanoid robot dexterous hand developed by the company uses a full driving mode, which has a high degree of freedom, can almost imitate all human hand shapes and delicate movements, and can obtain good results for applications and complex handling scenarios; at the same time, high-torque DC motors and brushless hollow cup motors have formed a series of products, successfully used in humanoid robots and other fields. Research to break through foreign technical barriers; 8mm permanent magnet stepper motors achieve automated mass production, and are also actively deploying 3.4/4.4mm more challenging products. We are optimistic about the trend of broadening the application boundaries and intelligence of the company's microtransmission systems in automobiles, medical care, humanoid robots, XR, etc. After the company integrates gearboxes and drives, the product value is expected to continue to increase, and there is plenty of room for growth.

Maintain a “Highly Recommended” investment rating. Considering the poor demand for MR products, based on the latest financial reports, we currently forecast 24-26 revenue of 1.51/1.96/2.65 billion yuan and net profit of 0.2/0.27/0.37 billion yuan, corresponding to the current share price PE of 45.7/34.5/24.8 times. Considering the company's technical barriers in the field of micro transmission systems and the early card position advantages of leading customers, while actively promoting vertical integration strategies, we maintain a “Highly Recommended” investment rating.

Risk warning: Downstream demand falls short of expectations, new product R&D project progress falls short of expectations, risk of fluctuations in raw material prices, risk of macropolitical and economic environment fluctuations.