Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 5.016 billion yuan, a year-on-year increase of 17.85%, net profit to mother 0.389 billion yuan, a year-on-year increase of 50.68%, after deducting non-return net profit of 0.373 billion yuan, a year-on-year increase of 46.85%. 24Q2 achieved revenue of 2.698 billion yuan, a record quarterly high, up 19.31%/16.37% year over year, net profit to mother of 0.213 billion yuan, up 31.85%/21.38% year over month, net profit excluding net profit up to mother 0.204 billion yuan, up 25.18%/20.32% yoy. The 24Q2 exchange rate fluctuated little year over year, excluding the impact of exchange gains and losses, and a significant year-on-year increase in non-net profit.

Here are our reviews:

Industry sentiment is picking up opportunities, and various business sectors continue to look better at each business sector—1) Tool sector: 24H1 Industry prosperity has recovered, and downstream inventories have bottomed out.

The company's tool business revenue was 1.959 billion yuan, up 20.90% year on year, and gross profit margin was 24.62%, up 1.12 percentage points year on year. The company continues to promote industry innovation, give full play to the advantages of technology platforms and product platforms, provide customers with differentiated solutions and expand product application opportunities in surrounding tool use scenarios based on different product positions. At the same time, the company relies on its “overseas” leadership to meet the multi-regional supply needs of leading customers and achieve a further increase in tool share, increasing its share of total revenue from 36.05% in 2023 to 39.05% of 24H1. 2) Home appliance sector: With the digestion of home appliance inventories and the recovery of industry sentiment, the 24H1 household appliance sector generated revenue of 1.773 billion yuan, an increase of 18.15% over the previous year. Demand for intelligent upgrading and low-carbon industries has increased, technologies such as AI, voice, and the Internet of Things have accelerated integration with existing technology, technological innovation products are driving the expansion of market space, and the penetration rate of intelligent home appliances in emerging markets has increased. As own-brand companies go overseas to build a global supply chain, market share is further concentrated on leading companies. 3) New energy sector: With the core technology of “1 charge, 1 chip, 1 cloud 3S” (charging, battery, cloud platform, BMS, PCS, EMS), the company provides customers with two types of products: controllers and components, complete machines and systems, which are mainly used in the two major fields of energy storage and new energy vehicles. The company actively grasped incremental market opportunities such as large storage, industrial and commercial energy storage, and NEV charging. The 24H1 NEV sector's revenue was 1.04 billion yuan, an increase of 13.74% over the previous year. Specifically, the energy storage business achieved revenue of 0.76 billion yuan, an increase of 13.74% year on year; the new energy vehicle business achieved revenue of 0.28 billion yuan, up 14.43% year on year; revenue from controller and component products was 0.362 billion yuan, up 31.39% year on year, the faster growth rate; and revenue from complete machines and systems was 0.678 billion yuan, up 6.11% year on year. 4) Industrial control sector: 24H1's revenue was 0.156 billion, up 13.82% year on year, with servo drive and motor systems business increasing 16% year over year.

The company mainly provides downstream automation equipment and industrial robot customers with core components such as PLC, motion control cards, stepper/servo drives, motors, etc., and motion control solutions based on industry processes, which are widely used in 3C electronics, industrial robots, medical equipment, photovoltaic equipment, semiconductor equipment, dispensing, carving, SMT and other industries.

Profitability continues to improve, and overseas bases are progressing smoothly

24H1's industry boom has recovered and the supply and demand environment is friendly. The company achieved a comprehensive gross profit margin of 23.90%, an increase of 2.32 percentage points over the previous year by reducing costs and increasing the efficiency of the old business, and improving overall profitability through technological innovation and adding new products. The gross margin of several sectors increased year on year. At the same time, the gross margin of the export business benefited from a slight devaluation of the RMB in the first half of the year. The total revenue of 24H1's overseas bases in Vietnam, India, Mexico and Romania was 1.011 billion yuan, an increase of 72.65% over the previous year.

Overseas base revenue increased to 20.16% of total revenue, and the share of export revenue increased to 31.19%.

In the medium to long term, demand for intelligent social intelligent control continues to grow rapidly. The company operates in multiple regions, and its leading advantage is prominent, and the global market share is expected to increase further in the future. Focusing on the general direction of intelligent control, the company has been developing a new energy business segment for many years, focusing on benefiting from the rapid penetration of lithium battery applications in various industries.

By combining organizational optimization, cost reduction and efficiency measures, the company is expected to achieve continuous revenue and profit growth.

Profit forecasting and investment advice: Under the trend of intelligence, the company is expected to continue to grow over a long period of time. Combined with organizational optimization, cost reduction and efficiency measures, etc., it is expected that revenue and profit will continue to grow. In the future, as external factors are gradually eliminated, the impact of short-term and one-time expenses weakens. At the same time, as the company launches new products and high-priced inventory is cleared, the company's profit growth is expected to accelerate. The company's net profit for 24-26 is estimated to be 0.723/0.934/1.196 billion yuan, corresponding PE is 18/14/11X, maintaining a “buy” rating.

Risk warning: Competition in the industry intensifies, the impact on the global economy exceeds expectations, expenditure exceeds expectations, order delivery falls short of expectations, etc.