Introduction to this report:

The company's AI high-power power supply sample delivery is progressing smoothly, and the global production capacity layout is localized delivery, which is expected to increase both business and profit.

Key points of investment:

Maintaining the “Overweight” rating, the target price was raised to 45.00 yuan. The company's product layout is diverse, overseas orders are progressing smoothly, and AI server power expectations have increased, and the 24-26 EPS will be adjusted to 1.45 (-0.09) /2.29 (+0.41) /2.91 (+0.71) yuan, respectively. Considering the growth brought about by the company's major overseas customers and expansion in emerging fields, a valuation of 31X PE was given in 2024, corresponding to a target price of 45.00 yuan (originally 30.50), maintaining an increase in holdings rating.

Incident: Recently, Nvidia announced the design progress of GB200NVL72 rack products and the participation of more than 40 data center infrastructure providers in the construction and design. Among them, high-power power supply manufacturers include Delta Electric, Guangbao, Megmeet, and Flextronics. Megmeet has become Nvidia's sole supplier in the mainland and is expected to provide high-wattage power supplies for GB200 products.

The profit of the high-power power supply business increased. In 2024, H1, the company's power supply product revenue was 1.097 billion yuan, up 13.05% year-on-year. In recent years, the company's server power supply business has continued to receive multiple project requirements and orders from leading international customers such as Ericsson and Cisco, and the batch delivery schedule has accelerated.

The company entered the Nvidia Qualified Supplier List. The company announced its participation in the innovative design and cooperative development of the Nvidia Blackwell GB200 system, and is expected to receive batch orders in 25 years.

The GB200 uses a 5.5 kW high-power power supply. The power device uses silicon carbide MOSFETs. The cost will be 3-4 times that of 3.3 kW silicon-based MOSFETs, and these power devices account for about 35% of server power supplies. It is expected that the price of a single watt of 5.5 kW high-power power power supplies on the price side will further increase to more than 60% of the original price.

The company's global layout enables localized delivery, and is expected to achieve high-quality business development. The company's global “R&D+manufacturing+sales” multi-point layout network is becoming more and more perfect. Currently, it has established overseas R&D centers in the US and Germany to continue to increase reserves for the company's future technological development; to achieve global delivery capacity, it has invested in production capacity construction in Thailand, India and the US to improve the company's global supply chain layout, which can meet the manufacturing and delivery needs of customers in overseas regions; it has established representative offices in more than 10 countries and regions around the world to seek sales channels with international leaders.

Risk warning: Product technology iteration falls short of expectations; overseas market expansion falls short of expectations.