Incident: On July 1, the company released its 2024 semi-annual performance forecast. 2024H1 achieved net profit of 0.361-0.413 billion yuan, a year-on-year increase of 40-60%; net profit deducted from non-mother was 0.356-0.407 billion yuan, an increase of 40-60% year-on-year.

The sentiment of the industry continued to pick up, and both revenue and profit increased. According to the company's 2024 semi-annual performance forecast, the company's revenue for the second quarter continued the growth trend of the first quarter, and gross margin continued to rise, eventually achieving both revenue and profit growth in the first half of the year, mainly due to the recovery in industry sentiment, and the continued increase in the market share of the company's leading customers and high-value products. Looking at the specific business, demand in the home appliance and tool business has returned to normal. The new energy industry is also being cleared at an accelerated pace as demand recovers. The company's new products represented by charging piles, BMS, and PCS have been introduced to the market and contributed incrementally. We believe that the development of AI terminal applications has brought a wider range of application scenarios and needs to the intelligent controller industry, and the development of the industry is expected to accelerate. The company has accumulated rich technical platforms and product platforms, has strong product strength advantages, and is expected to fully benefit from the growing demand in the industry.

Expanding overseas markets, the market share is expected to increase further. According to the company's investor exchange on June 19, the company's overseas bases are still in the investment period, and profitability will continue to improve after large-scale mass production. For overseas production capacity, the company will invest according to business needs; on the market side, the company's energy storage business has achieved breakthroughs and mass sales by major customers in the European and American markets, forming a good market and brand influence. In the future, it is expected that multi-scenario integrated energy storage solutions and digital empowerment will be realized to accelerate the energy transformation process. At the same time, the company will increase market-side investment and increase its market share. Currently, overseas revenue accounts for more than 50%, and is expected to increase further in the future. We believe that the increase in demand for overseas product upgrades has brought new growth opportunities to the industry. The company has mature experience in process system construction and operation, and a global strategic layout will help expand overseas markets, further increase market share, and consolidate its leading edge.

The buyback shows confidence and helps the company to achieve long-term sustainable development. According to the “Notice on the Progress of Share Repurchase” issued by the company on July 1, within 12 months after January 23, the company plans to use its own funds to repurchase the company's shares through centralized bidding transactions for employee shareholding or share incentives. The repurchase amount is 0.08-0.15 billion yuan, and the repurchase price is no more than 13 yuan/share. As of June 30, 2024, the company has implemented a repurchase of 10,342,300 shares, accounting for 0.83% of the company's total share capital. The transaction price is 6.34-9.15 yuan/share, with a cumulative repurchase amount of 0.082 billion yuan. We believe that this buyback shows the company's confidence in future development prospects and high recognition of the company's value, and is conducive to safeguarding the interests of investors and enhancing investor confidence. Furthermore, the repurchase of shares to implement equity incentives or employee stock ownership plans will help the company establish a perfect long-term incentive mechanism, fully mobilize the enthusiasm of the core team, enhance the company's cohesion and competitiveness, and promote the company's long-term sustainable development.

Profit forecast and investment rating: The company's net profit for 2024-2026 is estimated to be 0.722/0.93/1.198 billion yuan, respectively. The current stock price corresponds to PE 19/14/11 times, respectively, maintaining a “buy” rating.

Risk warning: Customer growth falls short of expectations, downstream demand falls short of expectations, risk of fluctuations in raw material prices, risk of macroeconomic fluctuations.