Description of the event

On August 28, 2024, Johnson & Co., Ltd. released its 2024 semi-annual report. At 24H1, the company achieved operating income of 1.862 billion yuan (+38.77%), net profit to mother of 0.207 billion yuan (+20.78% year over year), and net profit of 0.189 billion yuan (+44.00% year over year) after excluding the impact of exchange earnings.

In 24Q2, the company achieved operating income of 1.038 billion yuan (+33.42% YoY, +25.86%), net profit 0.122 billion yuan (YoY -5.80%, +42.85% month-on-month), and net profit of 0.114 billion yuan (YoY -9.41%, YoY +40.43%). 24H1 gross sales margin was 17.70%, +0.04pct year on year; 24H1 net sales margin was 11.12%, -1.66pct year on year. 24Q2 gross sales margin was 17.91%, +0.58pct year on year, +0.48pct month on month; 24Q2 net sales margin was 11.74%, -4.89pct year on year, +1.40pct month on month.

Core views

The 24H1 home appliance and auto parts business is booming, and revenue has increased significantly over the same period last year. At 24H1, the home appliance business achieved revenue of 1.644 billion yuan (+37.00% year over year), and the auto parts business achieved revenue of 0.148 billion yuan (+68.88% year over year).

Home appliance business: (1) Vacuum cleaners and various small household appliances go hand in hand. The 24H1 vacuum cleaner business had revenue of 0.967 billion yuan (+26.02% year over year), and the market position was consolidated. The sales revenue and share of small household appliances such as 24H1 personal care appliances and environmental cleaning appliances all increased, with a total revenue of 0.677 billion yuan (+56.48% over the same period), accounting for 41.18% of the home appliance business. The kitchen appliance business continued to advance, dishwasher product certification went smoothly, and mass production gradually started. (2) Increase R&D innovation and continue to improve the Vietnamese factory. The company has set up R&D centers in Vietnam, and currently has R&D centers in Ningbo, Suzhou and Vietnam to develop innovative home appliances for the Chinese and global markets; by the end of the reporting period, 39 new home appliance projects were under development. During the reporting period, the self-made PCBA and battery packs were used in more than 25 trial and mass production projects. The Vietnamese factory supply chain system was further improved. The company cultivated the local supply chain, and domestic supply chain manufacturers followed suit. The company continues to invest in building digital factories, and informatization and automation enable lean production.

Auto parts business: (1) EPS motors entered a period of rapid growth, and brake motors began to gain strength.

The company's EPS motor customers have covered well-known domestic and foreign steering system suppliers such as Nexteer, ZF, JTEGATE, and Schaeffler. During the reporting period, 7 targeted items were added, and the total sales amount over the entire life cycle exceeded 1.5 billion yuan. The company's brake motors are still small. As the penetration rate of the line control market gradually increases, the company will increase investment and market development in brake motors to find more customers to establish strategic partnerships. (2) Adhere to scientific and technological innovation and maintain a leading edge. The company always insists on innovation-driven development, closely follows the development of cutting-edge technology in the industry, and strives to maintain its leading edge in technology. By the end of the reporting period, the company was developing 26 new projects, including a total of 10 DP-EPS and R-EPS projects; 5 line control projects.

Investment advice

The company implements the strategic goal of “vacuum cleaner-based business, diversified small household appliances as growth business, and EPS motors as strategic business”. In the field of home appliances, the company continues to expand product categories, explore overseas markets, and lay out overseas production capacity; in the field of auto parts, the company has a high-quality customer structure, continues to receive orders, and its performance has entered a period of rapid growth. We expect revenue for 2024-2026 to be 3.585, 4.388, and 5.27 billion yuan, respectively, with year-on-year increases of 29.2%, 22.4%, and 20.1%, respectively; net profit to mother will be 0.417, 0.519, and 0.638 billion yuan, respectively, with year-on-year increases of 29.5%, 24.5%, and 22.9%, respectively; corresponding EPS will be 1.12, 1.39, 1.71 yuan, and corresponding PE will be 14.22, 11.42, and 9.30, respectively, maintaining the “buy” rating .

Risk warning

Risk of trade friction; risk of high customer concentration; risk of exchange rate fluctuations.