Core views

In the first half of 2024, we achieved revenue, net profit attributable to mother, net profit after deducting 4.193, 0.287, and 0.277 billion yuan, an increase of 46.23%, 57.89%, and 64.43% year-on-year. Q2 achieved revenue, net profit attributable to mother, and net profit not attributable to mother of 2.203, 0.145, and 0.14 billion yuan, which increased 10.64%, 1.70%, and 1.39%, respectively. The company is a leader in automobile intelligence in China. It has plenty of orders in hand, an increase in the share of new energy orders, and mass production of new products. As the company's new production capacity is launched one after another, the company is expected to show resilience and flexibility in operation. Net profit due to mother in 2024-2025 is expected to be 0.65 and 0.83 billion yuan, respectively. The current stock price corresponds to PE valuations of 27X and 21X, respectively, maintaining a “buy” rating.

occurrences

The company released its 2024 mid-year report. In the first half of 2024, we achieved revenue, net profit attributable to mother, net profit after deducting 4.193, 0.287, and 0.277 billion yuan, an increase of 46.23%, 57.89%, and 64.43% year-on-year.

Brief review

Strong customers led to significant increases, and multiple parties targeted improvements to the revenue structure. In the first half of 2024, we achieved revenue, net profit attributable to mother, net profit after deducting 4.193, 0.287, and 0.277 billion yuan, an increase of 46.23%, 57.89%, and 64.43% year-on-year. By business, automotive electronics, precision die-casting, precision electronic components, and LED lighting achieved revenue of 30.71, 0.914, 0.074, and 0.086 billion yuan respectively, accounting for 73.23%, 21.80%, 1.76%, 2.05% of revenue, +65.41%, +23.55%, -58.33%, and +67.28%, respectively. Among them, Q2 achieved revenue, net profit attributable to mother, and net profit not attributable to mother of 2.203, 0.145, and 0.14 billion yuan, with year-on-month increases of 10.64%, 1.70%, and 1.39%, respectively. Performance growth in the first half of '24 stemmed from customer structure optimization. Customers such as Ideal, Cyrus, Chery, and Geely increased significantly. At the same time, the company's orders were greatly expanded. In the automotive electronics business, it broke through SAIC Audi, and received new projects from customers such as Stellantis Group and Changan Mazda, and received new projects from domestic car companies including Great Wall, Changan, Xiaopeng, and BYD; in the precision die-casting business, it received new projects from ZF, Bosch, Borg Warner, BYD, Weipai, UMC, and other important customers.

Gross margin improved month-on-month, and cost control was stable. The company's gross profit margin, net profit margin, and period expense ratio for the first half of 2024 were 21.76%, 6.90%, and 14.00%, respectively, -0.46, +0.48, and -1.97pct year-on-year, respectively. The gross profit margin of the automotive electronics business was 20.71%, and the annual gross profit margin of the precision die-casting business was 25.73%. In the first half of the year, the sales expense ratio, management cost rate, R&D expense ratio, and financial expense ratio were 3.45%, 2.21%, 8.09%, and 0.34%, respectively, which were basically the same. Q2 The company's gross profit margin, net profit margin, and period expense ratio were 21.94%, 6.63%, and 13.87%, respectively, +0.38, -0.57, and -0.27pct, respectively.

Breakthroughs in both automotive electronics and precision die-casting have sped up production capacity construction to enhance delivery performance. 1) In 2024, the company continued to increase investment in R&D, and automotive electronics products and technology were rapidly iterated. The company launched an integrated cabin domain control product based on the Qualcomm 8255 chip; simultaneously developing integrated cabin driving and central computing unit products based on the Qualcomm 8775 chip, which is expected to be launched in the second half of this year. 2) The company plans to increase various fund-raising projects. Among them, the new Huizhou plant for the precision die-casting business has already been put into operation, the new Huizhou plant for the automotive electronics business will be put into operation in July 2024, and the first phase of the new precision die-casting parts production base in Zhejiang Changxing Development Zone is expected to be put into operation within 2024; Huayangtong will establish new subsidiaries in Chongqing and Shanghai in July 2024 to enhance localization support and service capabilities; strengthen cooperation with Japanese companies to lay out overseas production sites and make new progress in overseas production bases. 3) Based on the current delivery environment with short product development cycles, rapid iteration, and increased industry competition, the company is continuously improving its ability to achieve high-quality delivery.

Investment advice

The company has plenty of orders in hand, an increase in the share of new energy orders, and mass production of new products. As the company's new production capacity is launched one after another, the company is expected to show resilience and flexibility in operations. We expect net profit to be 0.65 and 0.83 billion yuan for 2024-2025, respectively. The current stock price corresponds to PE valuations of 27X and 21X, respectively, to maintain a “buy” rating.