1H24 performance slightly exceeded our expectations

The company announced results: 1H24 achieved revenue of 1.842 billion yuan, +27.2% year over month, +2.1% month on month; net profit to mother 0.387 billion yuan, +104.5% year on month, positive month on month; net profit without return to mother 0.29 billion yuan, +52.6% year on year and +63.1% month on month. Corresponding to 2Q24, revenue was 0.98 billion yuan, +32.0% YoY, +13.4% month-on-month; net profit to mother was 0.262 billion yuan, +123.7% YoY, +109.9% month-on-month; after deducting non-net profit of 0.164 billion yuan, +41.2% YoY and +31.6% month-on-month. The performance slightly exceeded our expectations. The main investment income was 98.74 million yuan from the divestment of Cybersecurity Technology. After exclusion, the performance was in line with our expectations.

Development trends

The charging pile business realized at an accelerated pace, and the traditional main business grew steadily. By business, 1H24 charging pile business revenue was 0.378 billion yuan, +92.37%; traditional main business revenue was 1.438 billion yuan, +18.0% year over year, of which diagnostic product revenue was 0.608 billion yuan, +1.78%/-11.7% yoy, TPMS/ADAS/software revenue 0.329/0.177/0.211 billion yuan, corresponding to +14.6%/26.3% month-on-month 7.5%/+9.7%. We believe that: 1) the new charging pile business has improved in the early stages of R&D, sales, and capacity layout, and is expected to become a new growth engine in the future; 2) the traditional business maintains steady growth and provides a rich safety cushion. Among them, TPMS/ADAS is growing at an impressive rate and becoming the driving force.

The investment income from the divestment of the subsidiary led to performance exceeding expectations, and the profitability of all businesses improved. 2Q24 transferred 5% of the shares in its subsidiary Cybersecurity Technology and completed the divestment, receiving investment income of 98.74 million yuan; adjusted net profit of 0.163 billion yuan was in line with our expectations. The 2Q24 company's gross profit margin was 55.9%, -0.8 pct. We think it was mainly due to the increase in revenue share of the charging pile business; +5.8ppt compared to the previous year, mainly due to the restoration of profits in the traditional business and the upward trend in the charging pile business. The adjusted net interest rate for 2Q24 was 16.7%, +0.9/+2.2ppt, mainly due to: 1) the release of scale effects and cost control efficiency. The fee ratio was 35.1% during the 2Q24 period, -4.6ppt month-on-month; 2) exchange earnings of 18.57 million yuan, accounting for 0.6% of revenue.

Products, channels, and production capacity have accumulated and underdeveloped, and the charging pile business has opened up a second development curve. Product: The hardware side launched a new high-power household charging pile and promoted new product reserves such as next-generation ultra-fast integrated charging piles and megawatt-class charging piles (MCS); the software side combines AI technology to develop and improve the charging cloud platform (operation, operation and maintenance, app application) to provide a full range of solutions. Channel: The number of 2B strategic customers in North America and Europe continues to grow, and cooperation projects with strategic customers such as leading car companies and Southeast Asian public institutions have been launched in the Asia-Pacific region. The 2C side cooperated with 60+ leading vertical media to set up 300+ cooperative demonstration stations around the world. Supply chain: Further improve the warehousing system in Europe, North America and other places.

Profit forecasting and valuation

We maintain our 2024/2025 net profit forecast of 0.45/0.65 billion yuan. The current stock price corresponds to 2024/2025 25.3/17.7x P/E. Maintaining an outperforming industry rating and maintaining a target price of 32 yuan, corresponding to 32.1/22.5x P/E in 2024/2025, with 26.6% upside compared to the current stock price.

risks

The international trade situation worsened; exchange rate fluctuation risk; geopolitical risk; industry competition intensified.