Core views

Silver Wheel Co., Ltd. released its 2024 semi-annual report. 24Q2 achieved revenue of 3.182 billion yuan, +17.6% year over year; net profit to mother of 0.211 billion yuan, +33.3% year over year; by business, steady increase in commercial vehicle profits, passenger car and digital energy business revenue volume, the second third growth curve is clear. The company's gross margin and expense ratio are relatively stable, promoting cost reduction and efficiency and organizational adjustments, and introducing OPACC as an assessment index. Overseas business has grown rapidly, and the North American subsidiary TDI has performed well in turning losses into profits. European operators have also significantly reduced losses, contributing greatly to profit flexibility.

occurrences

The company released its 2024 semi-annual report. In 24Q2, the company achieved revenue of 3.182 billion yuan, +17.6% year over year; net profit to mother of 0.211 billion yuan, +33.3% year over year; net profit after deducting non-return to mother 0.185 billion yuan, +24.8% year over year, which is the overall median of the previous forecast.

Brief review

The revenue volume of the passenger car and digital energy business, the second and third growth curves are clear.

In terms of revenue by business, 24H1 commercial vehicles/passenger vehicles/digital and energy/other segments were 23.4/3.18/0.44/0.2 billion yuan, respectively, -1.5%/+36.4%/+23.5%/+3.4% compared with the same period last year.

Commercial vehicles increased steadily, and the H1 gross profit margin increased significantly by 25.9% year-on-year +2.8pcts; orders from many international customers in the passenger car sector continued to accelerate, receiving projects such as PPE chip cold plates for international luxury cars. The digital energy sector has received orders for thermal management projects such as energy storage, data centers, and low-altitude aircraft.

Cost reduction and efficiency have gone hand in hand with organizational adjustments, and gross margins and expense ratios are relatively stable.

The 24Q2 gross profit margin was 20.92%, which was basically the same year on year, -0.64pcts; the cost ratio for the period was 12.94%, +0.61pcts year on year, and -0.25pcts month-on-month. Among them, the sales/management/ R&D/finance expense ratios were 2.8/5.3/4.6/0.3 pcts respectively, and the overall stability was +0.8/-0.3/+0.03/+0.1 pcts compared to the previous year. The net profit margin after deduction for the period was 5.81%, +0.33pct year over year. The company introduced OPACC as an assessment indicator, and the organizational structure was upgraded from 33322 to 44332 to continue to promote cost reduction and efficiency and global development.

Overseas business grew rapidly, and the North American subsidiary TDI performed well by turning losses into profits.

24H1's North American operator TDI achieved revenue of 0.706 billion yuan, +50.7% year-on-year, and a net profit of 17.85 million yuan, which turned a loss into a profit (loss of 98.57 million yuan in 23 years), which was a very impressive performance; the European operator's revenue was 85.58 million yuan, +91% year-on-year, and net profit of -7.41 million yuan also significantly reduced losses, contributing greatly to profit flexibility.

Investment advice: Relying on cost and scale advantages, high-quality growth customer expansion and global production capacity layout, the company has grown into a leading domestic heat exchange product.

Based on the new digital and energy business and the potential for overseas incremental market expansion, compounding the trend of reducing costs and increasing efficiency to increase profitability, the company's net profit for 2024-2026 is estimated to be around 0.82, 1.11, and 1.38 billion yuan, respectively, corresponding to PE of about 16.6, 12.3, and 9.9 times, respectively, maintaining a “buy” rating.

Risk warning: Industry sentiment falls short of expectations, industry competition deteriorates, raw material prices fluctuate sharply, new customer expansion and production capacity investment fall short of expectations.