Description of the event

The company's 2024H1 revenue was 1.587 billion yuan, -11.40% year over year; net profit to mother was 0.096 billion yuan, -14.46% year over year; net profit after deducting non-return to mother was 0.052 billion yuan, or -50.14% year over year.

Looking at a single quarter, the company's 24Q2 revenue was 0.786 billion yuan, -21.83%; net profit to mother was 0.32 yuan, or -52.51% YoY; net profit after deducting non-return to mother was 0.012 billion yuan, or -82.12% YoY.

Incident comments

The share of smart factories in Huangshi is gradually increasing, and the industrial layout continues to be optimized. By product, 24H1 continuous fiber lasers, pulsed fiber lasers, special optical fibers, and ultrafast lasers account for about 80%, 12%, 3%, and 2% of revenue, respectively. In terms of subsidiary companies, 24H1's important subsidiaries Smart Photonics, Wuxi Ruike, and Wuhan Ruixin contributed 62.4%, 27.2%, and 9.3% respectively, but the main profit contributions came from Wuhan Ruixin and Smart Photon.

Profitability continued to recover, and operating profit declined only slightly after excluding depreciation. The 24Q2 company's gross profit margin was 26.47%, +1.54pct year on year, and continued to maintain the year-on-year recovery trend. Among them, the gross margin of core products all increased. The 24Q2 company's net interest rate decreased by 2.8 pct year on year, mainly due to: 1) Expense ratio increase of 2.2 pct during the 24Q2 period. Although the sales/financial expense ratios were -0.5/-0.1 pct year on year, the management/R&D expense ratios were +0.8/2.0pct year on year, mainly due to the decline in revenue scale; 2) 24Q2 impairment losses increased by 43.15 million yuan year on year, mainly due to asset impairment losses. Operating profit after excluding the effects of impairment was about -5.1% year-on-year. In addition, 24Q2 has tax deductions and rebates, which has increased profits to a certain extent.

Seize opportunities for lasers to go overseas, and overseas business is developing rapidly. In the first half of this year, the domestic laser equipment industry exported 0.95 billion US dollars, up 1.13% year on year, and declined in Q2. It is expected to be mainly affected by factors such as shipping and the international environment, but in the medium to long term, overseas demand is still an important increase in the laser equipment industry. From the company's perspective, the company's overseas business has maintained rapid development. At the same time, the global series lasers and HP high-performance series lasers have been launched. At the same time, 24H1 has added service outlets in Mexico to further increase its overseas market layout. 24H1's direct overseas revenue was +81% year-on-year, and the share of overseas revenue increased to 7%.

At the same time, leading automobile and new energy companies in South Korea, Turkey and other countries have also gradually begun to use Chinese lasers and equipment to increase profit margins. With years of technology accumulation, the company already has mature products and successful cases that can be applied to related fields. In addition, leading companies in the lithium battery industry are gradually expanding and building factories overseas, and the company will also get more opportunities as its core light source supplier.

Maintain a “buy” rating. We are optimistic that the company's profitability will continue to improve, and we expect high power and overseas market development to bring about flexible performance. Net profit due to mother is expected to be 0.3, 0.4, and 0.55 billion in 2024-2026, corresponding PE is 27x, 21x, and 15x, respectively.

Risk warning

1. The risk of manufacturing recovery falling short of expectations;

2. The risk of increased market competition;

3. The risk that the cost reduction of the product falls short of expectations.