Incident: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 0.216 billion yuan, +11.48% year over year, and net profit to mother 0.023 billion yuan, or -4.04% year over year. Among them, 24Q2 achieved revenue of 0.122 billion yuan, +28.13% year-on-year, and net profit of 0.013 billion yuan to mother, +17.81% year-on-year.

Q2 The revenue growth rate was corrected, and steady growth was achieved in various fields. 24Q2 achieved revenue of 0.122 billion yuan, +28.13% year over year, mainly due to 1) steady development in the consumer electronics sector, where order demand from major North American customers rose rapidly, driving an increase in market share; 2) achieved significant revenue growth in the automotive sector; 3) breakthroughs in smart homes, drones, etc. By business, 1) 24H1 thermal management materials achieved revenue of 0.204 billion yuan, or +9.49% year on year, gross margin of 25.74%, up 1.37 pct year on year, accounting for 94.13%; 2) Nano protective materials achieved revenue of 0.004 billion yuan, +91.78% year on year, gross margin of 37.3%, or 4.23 pct year on year. In terms of the cost ratio, the 24Q2 management fee rate was +0.71 pct to 4.92% year on year, mainly due to the increase in management expenses by new subsidiaries; the R&D cost rate was +1.06 pct to 7.38% year over year, mainly due to the company's increased investment in R&D projects.

The downstream application market has broad prospects for development, driving the company's revenue to continue to grow. 24H1 Global consumer electronics market demand continues to pick up. According to Canalys statistics, the global smartphone market and PC market have continued to grow for several consecutive quarters. At the same time, products such as AI phones and AI PCs are growing rapidly due to increased consumer demand for AI-related functions. The recovery of the consumer electronics industry combined with the rapid development of AI technology will bring a wider market space for the company's thermal management products.

Investment advice: It is expected that due to the expansion of the industry, entry into the supply chain of major North American customers, continued expansion of business scope, and high growth in heat pipes & heat transfer gaskets, the company's 2024-2026E net profit growth rate will reach 42.3%/40.7%/38.0%, respectively. Key indicators such as gross profit margin and net interest rate will steadily improve, maintaining the “holding-A” rating.

Risk warning: declining consumer electronics boom, intensifying market competition, falling product prices, etc.