Core views

The company's two core businesses, solar brackets and connectors, grew rapidly in the first half of the year, driving a high increase in the company's overall performance. In the first half of the year, the company's net profit to mother was 0.173 billion yuan, an increase of 162% over the previous year. Looking at the present, future growth expectations for the company's business continue to be optimistic. In terms of solar brackets, the company's US factory has been put into operation, and orders have been released one after another. Since April, global shipping prices have continued to rise, which may affect the company's customers' order placement and delivery pace in the short term. However, downstream demand is strong. After the shipping situation improves, customers are expected to further speed up order placement and delivery.

In terms of the connector business, the QSFP56/QSFP-DD 200G/400G high-speed connectors and high-speed copper connectors produced by the company have been delivered in batches, which are expected to benefit from the increase in demand for high-end digital communication products brought about by AI.

occurrences

The company released its 2024 semi-annual report. The company's revenue for the first half of 2024 was 3.172 billion yuan, up 42.63% year on year, and net profit to mother was 0.173 billion yuan, up 161.92% year on year.

Brief review

1. The company's connectors and solar brackets grew rapidly in the first half of the year.

In the first half of 2024, the company's revenue was 3.172 billion yuan, up 42.63% year on year, net profit to mother was 0.173 billion yuan, up 161.92% year on year, net profit after deducting non-return net profit of 0.161 billion yuan, up 171.99% year on year, and net cash flow from operating activities was 0.244 billion yuan, up 360.23% year on year.

In terms of business segments, the company's connector revenue in the first half of the year was 1.114 billion yuan, up 40.16% year on year, of which communication connector revenue was 0.469 billion yuan, up 0.39% year on year, consumer electronics connector demand was 0.155 billion yuan, up 34.65% year on year, and other connector and component revenue was 0.489 billion yuan, up 130.84% year on year; in the first half of the year, the company's solar bracket revenue was 1.932 billion yuan, up 41.13% year on year; in the first half of the year The company's other business revenue was 1.2.6 billion yuan, an increase of 109.45% year over year.

Looking at the subregions, in the first half of 2024, the company's domestic revenue was 1.406 billion yuan, up 48.05% year on year, and foreign revenue was 1.765 billion yuan, up 38.59% year on year.

In the second quarter of 2024, the company's revenue was 1.643 billion yuan, up 27.66% year on year, net profit to mother was 0.087 billion yuan, up 71.33% year on year, net profit after deducting non-return net profit of 0.7.9 billion yuan, up 61.61% year on year, and net cash flow from operating activities was 0.237 billion yuan, up 488.35% year on year.

2. The gross margin is rising steadily, and the cost ratio is falling steadily.

In the first half of 2024, the company's gross profit margin was 18.76%, up 1.47 pcts year on year. Among them, the gross profit margin of connectors was 32.78%, up 2.25 pcts year on year, and the gross profit margin of solar brackets was 11.94%, up 1.79 pcts year on year; in the connector segment business, the gross profit margin of communication connectors was 30.46%, down 0.19 pcts year on year, and the gross profit margin of consumer electronics connectors was 22.75%, up 0.72 pcts year on year. 3.30pcts.

In the first half of 2024, the company's sales expenses were 63.82 million yuan, up 40.43% year on year, management expenses were 0.155 billion yuan, up 46.17% year on year, R&D expenses were 0.107 billion yuan, up 4.23% year on year. The total cost of the three items was 0.326 billion yuan, up 28.22% year on year, and the three expenses rate was 10.27%, down 1.15 pcts year on year.

In the second quarter of 2024, the company's gross profit margin was 19.65%, up 3.64pcts year-on-year. In the second quarter of 2024, the company's three expenses totaled 0.181 billion yuan, up 28.25% year on year, and the three expenses ratio was 10.99%, down 0.05 pcts year on year.

3. US factories are gradually starting up, and downstream demand for photovoltaic stents is strong.

The company's PV bracket business is mainly aimed at overseas customers, covering the world's leading PV tracking bracket manufacturers such as Next Tracker and GCS. In September 2022 and February 2023, the company's subsidiary Taihua New Energy (Thailand) set up 3 subsidiaries in the US, which is beneficial for the company to further enhance its overall competitiveness. According to the company's investor relations activity record announcement in May, production capacity in the US factory is in a climbing phase, and production lines will continue to increase in the second and third quarters according to customer demand.

Since April, global shipping prices have continued to rise, which may affect the company's customers' order placement and delivery pace in the short term, while downstream demand is still strong. After the shipping situation improves, customers are expected to speed up order placement and delivery, contributing more incremental performance to the company. According to data from the US Energy Information Administration (EIA), the US added 12 GW of PV installed capacity in the first half of 2024, and is expected to add 37 GW of PV installed capacity in 2024. The US will add 5.9 GW and 18.8 GW of PV installed capacity in the first half of 2023 and the full year of 2023, respectively.

4. The connector business is expected to benefit from increased demand for high-end digital communication products, etc.

The company is a leading domestic supplier of communication connectors. External IO ports SFP and RJ45 can be used in servers, switches and other devices. The QSFP56/QSFP-DD 200G/400G high-speed connectors and high-speed copper connectors produced by the company have been delivered in batches. The development of AI will drive demand for products such as high-end switches and servers, and the company's communication connector business is expected to benefit from it.

5. Profit prediction and investment advice.

With the release of production capacity at the US production base and the improvement of operating capacity, and the further improvement of the company's photovoltaic business layout, the future development of the company's solar bracket business is optimistic. The connector business is expected to benefit from increased demand for high-end switches and the like brought about by AI. We expect the company's revenue from 2024 to 2026 to be 7.18 billion yuan, 8.73 billion yuan, 10.01 billion yuan, and net profit to mother of 0.36 billion yuan, 0.49 billion yuan, and 0.59 billion yuan respectively. The corresponding PE is 18x, 13x, and 11x, respectively, maintaining a “buy” rating.

6. Risk warning. Global PV installation and pace fell short of expectations, affecting the company's downstream customer demand for PV tracking brackets; changes in the external environment affected the normal operation of the company's US factory; US new energy subsidies fell short of expectations and affected the company's downstream customer demand, company product prices, etc.; US factory operating costs exceeded expectations; changes in raw material prices and exchange rate changes affected beyond expectations; international shipping capacity constraints exceeded expectations; competition in the PV bracket business intensified, company share and profitability declined, etc.; Demand for downstream consumer electronics and communications industries in the connector business declined, affecting the connector company's connector business Development; high financial pressure, affecting business development; more individual shareholders, risk of reducing holdings, etc.