Event: The company released its 2024 semi-annual report, achieving operating income of 1.622 billion yuan, an increase of 10.47% over the previous year; net profit to mother of 0.172 billion yuan, an increase of 2.62% over the previous year.

2024H1's revenue continued to grow, and the refrigerator and small household appliance motor and component business performed well. During the reporting period, the company achieved revenue/net profit of 1.622/0.172 billion yuan respectively, up 10.47%/2.62% year-on-year respectively, and achieved steady profit growth. By business, the refrigerator motor and component business grew strongly. The business achieved revenue of 0.165 billion yuan, a sharp increase of 39.79% over the previous year. The growth trend of the small household appliance motors and components business was also good, achieving revenue of 0.199 billion yuan, an increase of 35.07% over the previous year. In addition, the medical and sports health motors and components business did not perform well in the first half of 2024, with revenue of 0.094 billion yuan, a sharp decrease of 40.08% over the previous year.

Profitability has been steadily increasing, and high value-added businesses have led to an improvement in gross margin. The company has vigorously expanded high-value-added products in recent years and is expected to optimize the product structure. By business, in the first half of the year, the company's gross profit margin in the medical field was 41.79%, and the gross profit margin in the industrial control sector was 41.24%. Both ranked first and second in the company's total business, but currently they still account for a low share of the company's overall business, so there is room for further improvement in the company's gross margin. In addition, the company has established a cost management system and a cost budget system to control the costs of each department and product project from top to bottom through a strict budget management system.

At the same time, the company's finance department monitors and calculates changes in the cost of raw materials and accessories in real time. On the basis of ensuring product quality, all production departments are encouraged to reduce production costs as much as possible. In response to the cost impact caused by rising raw material prices and exchange rate changes, the company uses hedging and other methods to reduce the impact of price and exchange rate changes on costs, effectively ensuring that the profitability of the enterprise continues to increase.

Breakthroughs have been achieved in new product technology, and the layout in multiple fields has been gradually improved. During the reporting period, the company has mass-produced brushless motors for air conditioners, ice makers for refrigerators, lidar motors for new energy vehicles, electric air conditioning compressor motors and components, and high-end precision die-castings. At the same time, 8mm and 10mm hollow cup motors, high-precision ball screws and planetary roller screws, high-efficiency and energy-saving industrial motors, digital galvanometer motors, etc. are all in the prototype testing and customer sample delivery stage. The company has carried out a series of intelligent upgrades to product manufacturing and production technology. Focus on building the technical advantages of products, strengthening research and development of new products, and building technical barriers for new products.

Profit forecasting and investment advice. We expect the company's 2024-2026 revenue to be 3.589/4.369/5.284 billion yuan, net profit to mother 0.357/0.432/0.514 billion yuan respectively, and the PE corresponding to the current market value is 20.7/17.1/14.4X, respectively. The company continues to improve its product matrix and enter emerging fields. It has broad prospects and maintains a “buy” rating.

Risk warning: macroeconomic downturn risk; risk of increased market competition; risk of new fields and new product expansion falling short of expectations.