Event: The company released its 2024 semi-annual report. In the first half of '24, the company achieved operating income of 2.053 billion yuan, +30.44% year-on-year; realized net profit of 0.176 billion yuan, or +95.38% year-on-year. In Q2, the company achieved operating income of 1.279 billion yuan, +36.86% year-on-year, +65.29% month-on-month; realized net profit of 0.118 billion yuan, +65.63% year-on-year, and +102.05% month-on-month.
Gross margin increased steadily in the first half of '24. The company continues to increase investment in R&D and innovation and digital production equipment, adhere to lean production, accelerate the application of new technologies and iterative product upgrades. With the rapid growth of revenue, cost reduction and efficiency increase have led to an increase in gross margin. In the first half of '24, the company's comprehensive gross margin and net margin were 24.56%/8.85%, respectively, +5.11pct/+3.11pct. The company's comprehensive gross margin and net margin in Q2 in '24 were 24.78%/9.44%, respectively, +3.75pct/+1.80pct, and +0.58pct/+1.55pct month-on-month.
By business: 1) Energy products: Benefiting from strong demand in the global new energy industry, the company seizes industry development opportunities, and energy products continue to maintain a rapid growth trend. 2024H1's energy product revenue was 1.485 billion yuan, +28.44% year over year; gross profit margin was 24.03%, +6.20 pct year on year. 2) Lighting:
Market demand rebounded, compounded by the company's positive initiatives in optimizing the product structure and promoting technological innovation and product upgrades. The market competitiveness of the company's lighting products increased. 2024H1 achieved revenue of 0.453 billion yuan, +34.81% year over year; gross profit margin of 25.90%, +0.85pct year on year. 3) Other products: Other products achieved operating income of 0.116 billion yuan, +40.61% year over year; gross profit margin of 26.15%, +8.80pct year over year, mainly due to increased shipments in the incubation business and effective progress in customer development.
The company is speeding up overseas production capacity and is expected to establish a long-term foothold in overseas markets in the future. The company has increased its overseas transformer production capacity. Currently, the Mexican base is under construction. It is expected to be put into operation in the second half of '25. The Dallas base in the US is under construction and is expected to be put into operation in the fourth quarter of '24. We believe that in the face of potential trade risks and the gradual balance between future supply and demand in the US, the company has the advantage of brand, channel, and local production capacity layout in the North American market, and is more likely to establish a long-term foothold in overseas markets in the future.
Investment advice: The company's net profit for 24-26 is expected to be 0.36/0.475/0.581 billion yuan, respectively, or +72.0%/+31.8%/+22.4% year-on-year. The corresponding PE is 19.4/14.7/12.0, maintaining a “buy” rating.
Risk warning: The growth rate of the new energy industry is declining; the expansion of new customers falls short of expectations; the progress of production expansion falls short of expectations.