Investment Rating - Maintain BUY rating for Minth Group, indicating potential for over 15% return over the next 12 months [1][7][14] Core Views - Minth Group's 2H24 earnings showed mixed results with revenue falling short of expectations while gross profit margin (GPM) exceeded projections. Improved operational efficiency is evident through reduced net debt, lower capital expenditures (capex), and significantly higher free cash flow, which could support future margin enhancements and increased dividend payouts [1][7] - The company is well-positioned for revenue growth in FY25-27E, driven by rapid growth in battery housing revenue and the introduction of new products that are expected to generate substantial income. Battery housing margins are anticipated to improve further in FY25E as capex decreases [1][7] Financial Summary - Revenue is projected to grow from RMB 23,147 million in FY24A to RMB 26,186 million in FY25E, reflecting a year-on-year growth of 13.1% [2][11] - Net profit is expected to increase from RMB 2,319 million in FY24A to RMB 2,719 million in FY25E, representing a 17.2% year-on-year growth [2][11] - The earnings per share (EPS) is forecasted to rise from RMB 2.02 in FY24A to RMB 2.37 in FY25E [2][11] - The projected price-to-earnings (P/E) ratio is expected to decrease from 9.9x in FY24A to 8.5x in FY25E, indicating a more attractive valuation [2][11] Share Performance - The current market capitalization of Minth Group is approximately HK$ 24,982.9 million, with a target price set at HK$ 26.00, suggesting a potential upside of 20.9% from the current price of HK$ 21.50 [3][4] - The stock has shown strong performance, with a 1-month increase of 2.6% and a 6-month increase of 48.9% [5] Operational Efficiency - Free cash flow surged from RMB 131 million in FY23 to RMB 1,363 million in FY24, highlighting significant operational improvements [7] - The net gearing ratio is projected to decrease from 15.4% in FY24A to 6.4% in FY25E, indicating a stronger balance sheet [2][11]

Financial Performance - Revenue increased by approximately 12.8% to about RMB 23,147.1 million (2023: RMB 20,523.7 million) [3] - Gross profit grew by approximately 19.1% to about RMB 6,698.1 million (2023: RMB 5,622.0 million) [3] - Profit attributable to owners increased by approximately 21.9% to about RMB 2,319.3 million (2023: RMB 1,903.2 million) [3] - Basic earnings per share rose to approximately RMB 2.019 (2023: RMB 1.654) [3] - Total comprehensive income for the year amounted to RMB 2,241.3 million (2023: RMB 2,033.8 million) [6] - The company's total revenue for the year ended December 31, 2024, was RMB 23,147,123,000, representing a 12.9% increase from RMB 20,523,674,000 in 2023 [18] - The total revenue for the year ended December 31, 2023, was RMB 20,523,674,000, with significant contributions from various segments: plastic parts (RMB 5,625,554,000), metal and decorative strips (RMB 5,463,692,000), battery boxes (RMB 3,536,029,000), aluminum parts (RMB 4,328,137,000), and others (RMB 2,389,869,000) [25] - The profit before tax for the year was RMB 2,315,475,000, with a net profit of RMB 1,963,993,000 after tax expenses of RMB 351,482,000 [25] Dividends and Shareholder Returns - Proposed final dividend of HKD 0.435 per share (2023: none) [3] - The company proposed a final dividend of HKD 0.435 per share for the year ending December 31, 2024, totaling approximately RMB 463,860,000 [28] - The board has proposed a final dividend of HKD 0.435 per share, subject to approval at the upcoming annual general meeting [136] Capital Expenditure and Assets - Capital expenditure decreased by approximately 40.9% to about RMB 1,911.7 million (2023: RMB 3,235.4 million) [3] - Total assets less current liabilities reached RMB 24,182.1 million (2023: RMB 23,429.9 million) [9] - Non-current liabilities decreased to RMB 2,923.2 million (2023: RMB 4,290.0 million) [9] - The group's capital expenditure for the review year was approximately RMB 1,911,728,000, a decrease of about 40.9% from RMB 3,235,375,000 in the previous year, focusing on international market capacity layout and innovative product capacity expansion [107] Market Performance and Segmentation - Revenue from the Chinese market accounted for 40.3% of total revenue, while revenue from other countries made up 59.7% [18] - The segment revenue breakdown includes RMB 5,865,183,000 from plastic parts, RMB 5,488,146,000 from metal and trims, RMB 5,337,514,000 from battery boxes, and RMB 4,917,171,000 from aluminum parts [23] - The company reported a total segment profit of RMB 6,698,070,000 for the year, with the highest profit coming from aluminum parts at RMB 1,638,561,000 [23] - International revenue reached approximately RMB 13.82 billion, an increase of about 22.1% from RMB 11.32 billion in the previous year, driven by rapid growth in battery box business and stable growth in traditional products [56] Employee and Operational Metrics - The total employee costs for the year were RMB 5,005,149,000, reflecting an increase from RMB 4,424,998,000 in the previous year [27] - The group employed 25,663 staff as of December 31, 2024, an increase of 3,352 employees compared to the previous year, driven by steady revenue growth and ongoing business diversification strategies [111] - The company has implemented various short- and long-term incentive policies to enhance employee competitiveness and drive operational value creation [116] Research and Development - The company emphasized research and development, focusing on innovation to enhance its capabilities in core components for both electric and fuel vehicles [66] - The company filed 449 new patent applications during the review period, including 63 high-value patents and 43 international patent applications [73] Environmental and Social Governance (ESG) - The company is committed to environmental sustainability, focusing on energy-saving and carbon reduction through process improvements and renewable energy deployment [48] - The company is enhancing its ESG framework and preparing for climate risk assessment disclosures in compliance with the Hong Kong Stock Exchange requirements [48] - The group received the title of "Leader" in China's industrial carbon peak for 2024 and was included in the first batch of "Waste-Free Group" in Zhejiang Province [52] Strategic Initiatives and Future Outlook - The company plans to focus on strategic innovation to overcome intensified competition and product homogeneity in the Chinese market [124] - The company aims to leverage global resources to achieve localized excellence and enhance its competitive edge in the market [125] - By 2025, the company aims to achieve sustainable revenue growth, efficiency optimization, and cost reduction through global organizational upgrades and talent development [116] Financial Health and Cash Flow - The group's net cash flow from operating activities was approximately RMB 3,274,402,000, indicating a healthy cash flow situation [95] - As of December 31, 2024, the group's cash and cash equivalents totaled approximately RMB 5,274,971,000, a decrease of about RMB 1,184,083,000 from approximately RMB 6,459,054,000 at the end of the previous year [94] Risk Management - The group closely monitors foreign exchange risks and utilizes financial derivatives to mitigate interest rate and foreign exchange risks [102] - The company is closely monitoring tariff policies that may impact global automotive production costs and profitability [125]

Investment Rating - The report assigns a positive investment rating to the company, indicating a favorable outlook for future performance [4]. Core Insights - The company is one of the top global automotive parts suppliers, with a strong traditional business that supports performance growth. It has expanded into battery boxes, smart exteriors, and chassis components, accelerating its transition to electric and intelligent vehicles [4]. - Emerging businesses such as robotics, low-altitude flight, and wireless charging for vehicles are market hotspots, with new products expected to be mass-produced by 2025 or 2026, contributing to revenue [4]. - The company is expected to resume dividend payments after a hiatus in 2023 due to high capital expenditures and debt levels. It is transitioning from an expansion phase to a harvesting phase, with improved cash flow and stock buybacks anticipated [4]. - Projected net profits for 2024-2026 are 2.2 billion, 2.51 billion, and 3.15 billion, respectively, with corresponding P/E ratios of 11.3x, 9.9x, and 7.9x, indicating a currently low valuation [4]. Company Overview - The company has over 30 years of experience in the automotive parts industry, with a global presence. Founded in 1992 and listed in Hong Kong in 2005, it is the largest supplier of battery boxes and body structure parts globally, employing over 20,000 people across 77 factories and offices in 14 countries [9][10]. Financial Performance - The company has shown resilient revenue growth since its listing, with a 13.8% year-on-year increase in revenue to 11.09 billion in the first half of 2024, and a 20.4% increase in net profit to 1.07 billion [18][22]. - The gross profit margin and net profit margin have improved slightly in the first half of 2024, with figures of 28.5% and 9.7%, respectively [22]. Revenue Structure - The company has seen a continuous increase in overseas market share, with overseas revenue accounting for 59.2% of total revenue in the first half of 2024. The Americas and Europe represent significant portions of this revenue [26]. - The traditional business, including metal trims, plastic parts, and aluminum components, constitutes 67% of revenue, while new businesses like battery boxes account for 33% [29]. Emerging Business Development - The company has a strong order backlog of 236 billion, with over 53% of orders related to battery boxes, indicating significant growth potential in this area [31]. - The company has established a research center focused on automotive intelligent integration components and lightweight technology, leading to innovations in various sectors, including robotics and low-altitude flight [33][36].

Investment Rating - The industry investment rating is "Buy" [2] Core Viewpoints - The humanoid robot industry is on the verge of mass production, with significant advancements expected in 2024, marking a pivotal year for the sector [7][13] - Automotive companies are accelerating their entry into the humanoid robot market, leveraging their existing supply chain advantages and expertise in AI and automation [7][41] - Investment opportunities are identified in companies with strong overlaps in existing automotive business and humanoid robot capabilities, particularly in the midstream supply chain [7][55] Summary by Sections Humanoid Robots Overview - Major global players in the humanoid robot sector are making significant progress, with many products entering pilot testing phases in 2024 [13] - Humanoid robots consist of five main modules, with the joint components representing a significant cost portion [16][19] - The estimated BOM cost for humanoid robots is approximately 316,200 CNY per unit, with joint components accounting for about 50% of the total cost [22][31] Automotive Sector - Automotive companies are uniquely positioned to commercialize humanoid robots due to their existing supply chains and expertise in AI from autonomous driving research [41][42] - The demand for humanoid robots in automotive manufacturing is driven by the need for automation in complex assembly processes that currently rely heavily on human labor [41][42] Parts Suppliers - Automotive parts suppliers are encouraged to explore humanoid robot business opportunities, particularly those with strong customer overlaps and technological synergies [53] - Companies such as Top Group, Silver Wheel, and Aikodi are highlighted as having potential advantages in expanding into the humanoid robot market [55]

Investment Rating - The report assigns a positive investment rating to the company, indicating a favorable outlook for future performance [4]. Core Insights - The company is one of the top global automotive parts suppliers, with a strong traditional business that supports performance growth. It has expanded into battery boxes, smart exteriors, and chassis components, accelerating its transition to electric and intelligent vehicles [4][9]. - Emerging businesses such as robotics, low-altitude flight, and automotive wireless charging are market hotspots, with new products expected to contribute to revenue by 2025 or 2026 [4]. - The company is expected to resume dividend payments after a hiatus in 2023 due to high capital expenditures and debt levels. It is transitioning from an expansion phase to a harvesting phase, which will improve cash flow and allow for stock buybacks [4]. - Projected net profits for 2024-2026 are 2.2 billion, 2.51 billion, and 3.15 billion, respectively, with corresponding P/E ratios of 11.3x, 9.9x, and 7.9x, indicating a currently low valuation [4]. Company Overview - The company has over 30 years of experience in the automotive parts industry, with a global presence and a workforce of over 20,000 employees across 77 factories and offices in 14 countries [9][10]. - It is the largest supplier of battery boxes and body structure components globally and a leading supplier of automotive exterior parts [9]. Financial Performance - The company has shown resilient revenue growth since its listing in 2005, with a 13.8% year-on-year increase in revenue to 11.09 billion in the first half of 2024, and a 20.4% increase in net profit to 1.07 billion [18][22]. - The gross profit margin and net profit margin have improved slightly in the first half of 2024, with figures of 28.5% and 9.7%, respectively [22]. Revenue Structure - In the first half of 2024, domestic revenue was 4.53 billion, accounting for 40.8% of total revenue, while overseas revenue was 6.57 billion, making up 59.2% [26]. - The customer base is well-balanced, with European customers accounting for 42%, American customers 19%, Chinese customers 15%, and Japanese customers 21% [26]. Traditional Business Development - Traditional businesses, including metal trims, plastic parts, and aluminum components, accounted for 67% of revenue in the first half of 2024, providing a solid foundation for ongoing development [29]. - The company has engaged in forward-looking R&D and product layout, enhancing the value of its offerings [29]. Emerging Business Opportunities - The company has a significant order backlog of 236 billion, with over 125 billion in battery box orders, representing more than 53% of total orders [31]. - The company is actively developing products in the robotics sector, including structural components and joint assemblies, and is also exploring low-altitude flight technologies [33][35]. Valuation - The report compares the company to similar businesses in the automotive parts and battery box sectors, suggesting a low current valuation with projected P/E ratios indicating potential for growth [41].

Investment Rating - The report initiates coverage with a **Buy** rating for the company, citing a 55% upside potential based on a 10x PE valuation for 2024 [5][10] Core Views - The company is a global leader in automotive exterior parts, with a strong track record of revenue and profit growth, achieving a 19.7% CAGR in revenue and 12.2% CAGR in net profit from 2006 to 2023 [5] - The company's globalization strategy has been highly successful, with overseas revenue growing at a 29.4% CAGR from 2006 to 2023, and overseas revenue accounting for over 50% of total revenue in H1 2024 [5] - The battery shell business is a key growth driver, with orders worth RMB 125.08 billion as of H1 2024, expected to contribute significantly to future revenue [5][6] - The company's financial metrics are improving, with free cash flow turning positive in 2023, and a potential valuation re-rating as profitability and ROE improve [6] Financial Projections - Revenue is projected to grow from RMB 23.91 billion in 2024 to RMB 34.42 billion in 2026, with a CAGR of 16.0%-21.5% [6][7] - Net profit is expected to increase from RMB 2.25 billion in 2024 to RMB 3.17 billion in 2026, with a CAGR of 18.3%-18.9% [6][7] - Gross margin is forecasted to remain stable at around 27.4% from 2024 to 2026 [6][7] Business Segments - **Battery Shell Business**: Expected to generate revenue of RMB 49.5 billion in 2024, growing to RMB 106.2 billion by 2026, with gross margins improving from 21% to 22.5% [11] - **Plastic Parts Business**: Revenue is projected to grow from RMB 66.4 billion in 2024 to RMB 92.4 billion in 2026, with gross margins stable at around 24%-24.5% [11] - **Aluminum Trim Business**: Revenue is expected to increase from RMB 48.5 billion in 2024 to RMB 60.8 billion in 2026, with gross margins remaining at 37% [11] Growth Catalysts - The company's battery shell business is expected to benefit from the rapid growth of the global electric vehicle market, with a projected market size of RMB 632 billion by 2025 [171] - The company's global factory layout and diversified customer base provide a competitive advantage in the face of rising tariffs and deglobalization trends [5][6] - The company's smart exterior business is seen as a future growth driver, with potential for significant revenue contribution in the coming years [5][6] Market Position - The company is a top player in the global battery shell market, with a market share of approximately 8% in 2023 [175] - The company's global presence and strong customer relationships, including partnerships with major automakers like Tesla, BMW, and Volkswagen, position it well for continued growth [175][176] Historical Performance - The company has consistently expanded its product portfolio, from traditional exterior parts to aluminum components and battery shells, driving ASP growth from RMB 60 to nearly RMB 1,700 [169][170] - Overseas revenue has grown significantly, from RMB 124 million in 2006 to RMB 9.97 billion in 2023, with a CAGR of 29.4% [5][84]

Investment Rating - The report assigns an "Overweight" rating to the company for the first time [1] Core Views - The company is a global leader in automotive exterior parts, with a diversified product portfolio including plastic, metal, and aluminum components, as well as battery boxes [2] - The company has a strong market position in traditional businesses such as metal trim, aluminum parts, and plastic parts, ranking first domestically and globally in certain segments [2] - The battery box business has become a major growth driver, with global market share increasing from 2.1% in 2021 to 13.3% in 2023 [2] - The company is actively developing intelligent exterior products, including smart front faces, tailgates, and side doors, with significant breakthroughs in the intelligent B-pillar and electric side door systems [2] Financial Performance and Forecast - The company's revenue is expected to grow from RMB 25.115 billion in 2024 to RMB 34.032 billion in 2026, with a CAGR of 13.13% [3] - Net profit attributable to shareholders is projected to increase from RMB 2.342 billion in 2024 to RMB 3.143 billion in 2026 [3] - The PE ratio is expected to decline from 6.78x in 2024 to 5.05x in 2026, indicating an attractive valuation [3] Business Segments - **Metal and Trim**: Revenue is expected to grow steadily, with a CAGR of 4-6% from 2024 to 2026, driven by recovery in domestic and overseas markets [48] - **Aluminum Parts**: Revenue is forecasted to grow at a CAGR of 15% from 2024 to 2026, supported by strong demand in both domestic and international markets [48] - **Plastic Parts**: Revenue is projected to grow at a CAGR of 18-20% from 2024 to 2026, benefiting from the recovery in demand in China and overseas markets [48] - **Battery Box**: Revenue is expected to grow significantly, with a CAGR of 40% from 2024 to 2026, driven by the rapid expansion of the new energy vehicle market [48] Industry and Market Position - The company is a leading global supplier of automotive exterior parts, with a strong presence in the battery box market, ranking second domestically in 2020 [2] - The battery box market is expected to grow significantly, with global market size projected to reach RMB 44.4 billion by 2026, driven by the rapid growth of the new energy vehicle market [34] - The company has a competitive advantage in the battery box market due to its global production layout and "local supply" strategy, which reduces transportation costs for large components [2] Innovation and Future Growth - The company is actively developing intelligent exterior products, including smart front faces, tailgates, and side doors, with significant breakthroughs in the intelligent B-pillar and electric side door systems [2] - The company is also focusing on lightweight and integrated chassis solutions for battery boxes, which are expected to be key growth areas in the future [41] Valuation and Peer Comparison - The company's PE ratio is lower than its peers, with a 2024 PE of 6.78x compared to the median PE of 12.83x for comparable companies, indicating an attractive valuation [52] - The company's revenue growth and profitability are among the top in its peer group, with a strong focus on R&D and innovation, which supports its future growth potential [51]

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 26.43 for 2024, based on a 12x PE multiple [2] Core Investment Thesis - Long-term: The company is well-positioned to benefit from global capacity coordination, electrification trends, and localization, with battery box business as a key growth driver [2] - Medium-term: Traditional exterior parts business is expected to grow steadily due to trends in intelligence and integration [2] - Short-term: Revenue is pressured by downstream customers, but battery box business is growing rapidly due to increased market share of new energy vehicles [2] Financial Projections - Revenue is expected to grow from RMB 20.52 billion in 2023 to RMB 36.45 billion in 2026, with a CAGR of 21.0% [3] - Net profit is projected to increase from RMB 1.90 billion in 2023 to RMB 3.97 billion in 2026, with a CAGR of 26.7% [3] - EPS is forecasted to rise from RMB 1.65 in 2023 to RMB 3.42 in 2026 [3] Business Overview - The company is a global leader in automotive exterior parts and battery boxes, with over 70 factories worldwide [12] - Key product lines include metal and trim parts, plastic parts, aluminum parts, and battery boxes, contributing 25.6%, 26.4%, 20.3%, and 16.6% of total revenue in 2023, respectively [15] - The battery box business has grown rapidly, with revenue increasing from RMB 270 million in 2021 to RMB 3.54 billion in 2023 [18] Market Trends - Europe's electrification trend remains strong despite subsidy reductions, driven by carbon emission regulations and fuel economy standards [26] - The global battery box market is expected to reach RMB 63.8 billion by 2026, with a CAGR of 21.0% [44] - Localization is becoming a key trend, with the company expanding its overseas capacity to meet customer demands [55] Competitive Advantages - The company has a comprehensive product portfolio and strong R&D capabilities, with a focus on high-performance aluminum materials [53] - It has a diversified customer base, including major automakers such as Volkswagen, BMW, and Renault [54] - The company's vertical integration in the supply chain provides cost advantages and enhances its technological development capabilities [53] Industry Outlook - The automotive exterior parts market is expected to grow due to trends in intelligence and integration, with the company benefiting from its mature technology and patent barriers [2] - The battery box industry is highly competitive, but the company's cost efficiency, comprehensive manufacturing processes, and global capacity give it a strong position [47]

Automotive Market Performance - During the six months ended June 30, 2024, China's passenger car production and sales reached approximately 11.886 million and 11.979 million units, representing year-on-year growth of about 5.4% and 6.3% respectively[8]. - The export of complete vehicles from China during the review period was approximately 2.793 million units, showing a significant year-on-year increase of about 30.5%[8]. - The market share of Chinese brand passenger cars increased to approximately 61.9%, up about 8.8 percentage points year-on-year, marking a new high[8]. - The sales volume of new energy vehicles in China was approximately 4.944 million units, with a year-on-year growth of about 32%, resulting in a market share of approximately 35.2%[8]. - Global light vehicle sales during the review period were approximately 42.354 million units, reflecting a year-on-year increase of about 2.3%[9]. - In emerging markets, Brazil and India saw year-on-year growth of approximately 15.7% and 7.2% respectively, while the Thai market experienced a decline of about 24.2%[9]. Company Strategy and Operations - The company continues to enhance operational efficiency through effective collaboration across its four product lines: plastic parts, aluminum parts, metal and decorative strips, and battery boxes[10]. - The company is committed to a "Glocal" strategy, optimizing local layouts while maintaining global advantages to strengthen its core competitiveness in technology, products, resources, and talent[10]. - The company is planning a new site in Canada to further expand its global research, design, production, and sales network[10]. - The company is implementing a systematic management process for asset life cycles to achieve optimal capacity layout aligned with its global operations[10]. - The group has achieved rapid growth in revenue from battery box business, chassis structural components, and intelligent exterior parts, while traditional products also showed steady growth[11]. Financial Performance - The group's revenue for the review period was approximately RMB 11,090,414,000, an increase of about 13.8% compared to RMB 9,747,406,000 in the same period of 2023[15]. - Revenue from the Chinese market was approximately RMB 4,525,885,000, up about 7.5% from RMB 4,211,482,000 in the same period of 2023, driven mainly by the battery box business[15]. - International revenue reached approximately RMB 6,564,529,000, an increase of about 18.6% from RMB 5,535,924,000 in the same period of 2023, primarily due to rapid growth in the battery box business and improvements in traditional product sales in North America and the Asia-Pacific region[16]. - The attributable profit for the period was approximately RMB 1,068,192,000, an increase of about 20.4% from RMB 887,300,000 in the same period of 2023, driven by revenue growth and improved production efficiency[25]. - Gross profit for the period was approximately RMB 3,161,637,000, representing a 23.4% increase from RMB 2,562,733,000 in the same period last year, with a gross margin of 28.5%[28]. Sustainability and Safety Initiatives - The group has set a target for carbon peak by 2030 and carbon neutrality by 2050, with a focus on energy management and carbon emission reduction[12]. - The group’s injury accident rate per million working hours was 0.73 during the review period, reflecting a commitment to workplace safety[13]. - The group has implemented a digital EHS system with six modules to enhance global factory EHS management efficiency and risk prevention capabilities[12]. - The group is committed to sustainable development, actively participating in climate change initiatives to mitigate associated risks[13]. Research and Development - The group has filed 168 new patent applications during the review period, including 26 high-value patents and 18 international patent applications[23]. - The group has developed the Minal®-S636 aluminum alloy, which has passed real vehicle collision performance verification, achieving international advanced levels[22]. - The group has successfully developed various green low-carbon materials, achieving a comprehensive carbon reduction rate of over 30%[22]. - The group is focusing on expanding its product offerings in electric vehicle wireless charging and battery box integration technology[21]. Human Resources and Corporate Governance - The company focused on enhancing global strategic innovation and leadership capabilities, aiming for efficient global organizational layout and sustainable development[45]. - The company conducted 45 value consensus workshops to strengthen core values and promote a shared understanding among employees[45]. - The company is actively promoting global talent development and digital management systems to enhance leadership and team growth[46]. - The company has launched a global HR master data project to improve governance and collaboration in human resources[46]. - The audit committee, consisting of four independent non-executive directors, reviewed the group's internal control systems and financial statements[88]. Shareholder Information and Stock Options - Major shareholder Qin Ronghua holds a controlling interest with 450,072,000 shares, representing 38.73% of the company's issued share capital as of June 30, 2024[80]. - The company did not grant any stock options during the review period, and 538,200 stock options lapsed due to the resignation of grantees[52]. - The total number of stock options that can be granted under the 2022 stock option plan as of January 1, 2024, and June 30, 2024, is 116,183,579 and 86,183,579 respectively[49]. - The company has not experienced any forfeited contributions from employees under the share incentive plan during the review period[73]. - The company is committed to revising its share incentive plan without adversely affecting the rights of any selected participants[68]. Market Outlook - The company anticipates continued growth in the Chinese passenger car market, driven by ongoing price reductions by automakers and the introduction of trade-in subsidies[74]. - The company noted that the price war among car manufacturers intensified towards the end of Q1 2024, leading to increased sales volume[74]. - The company plans to focus on maintaining profit margins rather than participating blindly in price wars as the market enters a seasonal sales decline[74]. - In the review period, the Chinese automotive market is expected to see a gradual return to normal competition in the second half of the year, with a projected annual sales volume of approximately 26.8 million passenger vehicles in 2024, reflecting a year-on-year growth of about 3%[75]. - The global light vehicle market is forecasted to reach an annual sales volume of approximately 88.6 million units in 2024, representing a year-on-year increase of around 2.4%[76].

Investment Rating - Strong Buy (Maintained) with a target price of HKD 16.6 [1] Core Views - Revenue growth in 1H24 was in line with expectations, with traditional exterior parts slightly exceeding expectations and battery box business slightly below expectations [1] - Net profit growth in 1H24 was in line with expectations, with stable gross margins and increased expenses due to rising freight costs [1] - Future growth is expected to be driven by the battery box business and other new products, with a stable growth outlook [1] - Adjusted net profit forecasts for 2024-2025 to RMB 2.2 billion and RMB 2.58 billion, respectively, and introduced a 2026 forecast of RMB 3.1 billion [1] Financial Performance - 1H24 revenue: RMB 11.1 billion, +14% YoY, +2.9% QoQ [1] - 1H24 net profit: RMB 1.07 billion, +20% YoY, +5.1% QoQ [1] - Gross margin: 28.5%, +2.2PP YoY, flat QoQ [1] - Sales expense ratio: 4.8%, +0.8PP QoQ due to rising freight costs [1] - Management expense ratio: 6.7%, -1.0PP QoQ [1] - R&D expense ratio: 6.4%, -1.0PP QoQ [1] Business Segments - Traditional exterior parts revenue: RMB 7.8 billion, +10% YoY, -7% QoQ [1] - Metal and trim: RMB 2.5 billion, +1.2% YoY [1] - Plastic parts: RMB 2.8 billion, +14% YoY [1] - Aluminum parts: RMB 2.4 billion, +14% YoY [1] - Battery box and structural parts revenue: RMB 2.4 billion, +33% YoY, +24% QoQ [1] Future Outlook - Growth is expected to be driven by the battery box business and other new products [1] - The company is expanding its product categories in structural parts and traditional exterior parts to hedge against joint venture customers [1] - The company benefits from improved gross margins and expense ratios due to new business growth and the end of a high-intensity investment cycle [1] Valuation and Forecasts - 2024E revenue: RMB 24.123 billion, +17.5% YoY [2] - 2025E revenue: RMB 28.232 billion, +17.0% YoY [2] - 2026E revenue: RMB 33.091 billion, +17.2% YoY [2] - 2024E net profit: RMB 2.201 billion, +15.7% YoY [2] - 2025E net profit: RMB 2.577 billion, +17.1% YoY [2] - 2026E net profit: RMB 3.1 billion, +20.3% YoY [2] - 2024E PE: 5.9x, 2025E PE: 5.0x, 2026E PE: 4.2x [2]