Key points of investment:

On August 30, the company released its 2024 semi-annual report. In 2024, H1 achieved operating income of 3.29 billion yuan, +14.1% year-on-year; realized net profit of 0.42 billion yuan to mother, +24.0% year-on-year. 2024Q2 achieved operating income of 1.7 billion yuan, +12.5% YoY and +6.7% month-on-month; realized net profit to mother 0.23 billion yuan, +21.7% YoY, +15.3%.

The gross margin remains stable, and the ability to control costs continues to improve. The company accounts for a high share of overseas revenue, accounting for 84.5% of overseas revenue in 2023. The main customers are global car companies such as Stellanis, GM, and Ford. The overall annual pressure drop is low. Combined with a further increase in sales of products such as headrests and ceilings, the gross margin performance is good. The gross margin of the 2024H1 company reached 28.0%, +0.1 pct year on year. 2024H1's sales/management/R&D/finance expense ratios were +1.8/+7.3/+3.1/ -0.2%, respectively, -0.5/+0.4/-0.7/+0.8pct. R&D and sales expenses were reduced, and management expenses were increased due to personnel demand brought about by overseas expansion. At the same time, due to the high base of exchange earnings last year, the financial expense ratio rebounded. After excluding the impact of exchange, the company's expense ratio declined significantly during the period.

Expand the assembly horizontally from a single component to open up a secondary growth curve. While maintaining the impressive production and sales ratio of its main products, the company is actively expanding product categories, accelerating the implementation of interior support for new energy vehicles, and achieving a significant increase in the value of bicycles.

The total bicycle value of the company's main products in 2023 is about 589 yuan, and the bicycle value of the newly expanded roof and roof assembly products is expected to reach 700/4000 yuan respectively, which is a significant increase over traditional products, opening up a second growth curve for the company.

The profitability of the Mexican plant has recovered, and ceiling production capacity is about to be implemented, which is expected to be an important support for profit growth. In the first half of the year, Daimei Mexico Interior achieved revenue of 1.84 billion yuan, +7.3% year over year; realized net profit of 40.33 million yuan, +99.6% year over year; and net profit margin of 2.19%, +1.01 pct year on year. The profitability of the Mexican factory has recovered, and production capacity of 0.3 million integrated roof system products and 0.6 million sets of roof products has been put into operation. The Mexican factory is expected to become an important support for the company's future profit growth.

Profit forecasting and valuation: The company's products have expanded from single units to integrated products, and the value of bicycles has increased significantly. At the same time, it is actively developing globally. Overseas business continues to develop, production capacity is about to be implemented, and there is strong certainty that future revenue and profits will usher in steady growth.

We maintain a revenue forecast of 7.1/8.37/9.86 billion yuan and a net profit forecast of 0.9/1/1.18 billion yuan for 2024-2026, and maintain a “buy” rating.

Risk warning: Overseas market expansion falls short of expectations, domestic passenger car competition intensifies, raw material prices fluctuate.