Incident: The company released its 2024 mid-year report, achieving revenue of 0.669 billion yuan, a year-on-year change of -5.68%; realized net profit of 0.203 billion yuan, -9.1% year-on-year, and realized net profit of 0.195 billion yuan after deduction, or -10.74% year-on-year. (1) Looking at a single quarter, 2024Q2 achieved revenue of 0.354 billion yuan, a year-on-year change of -6.67% and +12% month-on-month; realized net profit of 0.102 billion yuan, -17.16% year-on-year, and +1.81% month-on-month, and realized net profit of 0.097 billion yuan after deduction, +0.07% year-on-year and +0.81% month-on-month.

(2) High and stable profitability: 2024Q2 company's gross profit margin was 51.13%, +1.38pct year on year; the company's net profit margin was 29.15%, -3.7 pct year on year.

Domestic revenue grew rapidly: The company's domestic revenue in the first half of the year increased 16.7% year on year to 0.074 billion yuan, and overseas revenue fell slightly by 7.89% year on year to 0.594 billion yuan. Among them, ODM revenue fell 27% year on year to 0.19 billion yuan. Overseas OBM was sold through its own brand “TERBLY” and France's own brand “AYRTON”. Domestic and foreign OBM revenue in 2023 was 0.43 billion yuan, up 2.3% year on year.

Promote production capacity construction and enhance supply capacity: The first phase of the company's fund-raising project “Performing Arts Lighting Equipment Production Base Phase II Expansion Project” has been officially put into operation. The company expanded the production capacity of the company's main products, optimized the product structure, and expanded product categories to meet market demand. It is expected that with new production capacity, efficiency will gradually increase. When demand for overseas orders appears, the company can respond quickly, and revenue is expected to continue to increase.

Investment advice: We expect the company's net profit to be 0.416/0.495/0.586 billion yuan in 2024-2026, respectively, and the corresponding PE is 11/9/8 times, respectively, to maintain an “increase in holdings” rating.

Risk warning: European and American economic recession, adjustments in the company's major ODM customer partnerships, demand for live performances falls short of expectations, international trade frictions and large exchange rate fluctuations, the company's new product development falls short of expectations, new production capacity progress falls short of expectations, etc.