Revenue and profit increased year on year, and profitability improved significantly: the company achieved revenue of 18.86 billion yuan in the first half of 2024, an increase of 32.1% year on year; gross margin was 17.2%, an increase of about 2.3 percentage points over the same period last year; operating expenses remained within 12%, and net profit to mother was 1.08 billion yuan, an increase of 147.1% year on year.

Demand in the mobile phone industry is recovering, and the product portfolio continues to be optimized: by business, the mobile phone business revenue was 13.03 billion yuan, an increase of 34.5% over the previous year. Among them, mobile phone lenses shipped 0.63 billion pieces, up 23.7% year on year, and continued to have the world's largest market share. High-end lenses of 6P and above shipped 0.16 billion pieces, up 23.2% year on year. During this period, the company achieved mass production of various 1-inch glass plastic hybrid main cameras and large periscope lenses and completed the research and development of various periscopes; mobile phone modules shipped 0.29 billion pieces, an increase of 13.5% year on year, maintaining the world's number one market share. During this period, the company's core motion devices for main cameras and periscope cameras Continued technological breakthroughs have been achieved. The good performance of shipments in the first half of the year and good expectations for new models from domestic Android customers and major overseas customers in the second half of the year, the company raised mobile lens and module guidelines, and mobile lens shipments increased by 5-10% year-on-year, and gross margin is expected to reach 20-25%; mobile phone module shipments are expected to remain the same as last year, with ASP increasing 10-15% year over year, and the annual gross margin is expected to be 6-10%.

It continued to invest in automobiles and AR/VR, and obtained a number of targeted projects: the automobile business revenue was 2.88 billion yuan, an increase of 16.4% over the previous year. Among them, 53.234 million pieces of automotive lenses were shipped, an increase of 13.1% over the previous year. During this period, the company completed research and development of long-range lidar modules, ADAS vehicle lenses with automatic heating functions, etc., and obtained several fixed projects for lidar products. The fixed vehicle module projects exceeded 10 billion dollars, showing the company's strong market potential and future growth momentum. The company's upward guidance: Vehicle lens shipments are expected to increase by 10-15% throughout the year, and the gross margin remains at 40%.

AR/VR business revenue was 0.99 billion yuan, up 111.4% year on year. The company continued to expand its layout in optical display and information interaction, and the revenue guidance was raised to 25% from a 15% year-on-year increase at the beginning of the year.

The target price is HK$57.3, giving it a purchase rating: We believe in the main line of upgrading mobile phone optics, and look forward to the steady development of the company's VR/AR business volume and in-vehicle optics. We forecast the company's revenue for 2024-2026 to be 38.39/43.78/47.88 billion yuan, and net profit of 2.27/2.87/3.34 billion yuan, respectively. The target price of HK$57.3 was given to the company, 20 times the PE valuation level in 2025. There is room for an increase of 31.65% compared to the current price, so the purchase rating is maintained.