Revenue and Growth - Total revenue for the year ended December 31, 2024, was RMB 6,693.1 million, representing a 15% year-on-year increase[3]. - Revenue from the new energy segment increased by 24% to RMB 3,462.0 million, contributing 52% to total revenue[3][10]. - The intelligent driving and networking segment saw a significant revenue growth of 27%, accounting for 8% of total revenue[10]. - The overall automotive market in China grew by 4.5% in 2024, with new energy vehicle sales increasing by 35.5% and achieving a market share of 40.9%[7]. - The group's revenue from the new energy sector increased by 24% year-on-year to RMB 3,462.0 million, accounting for 52% of total revenue as of December 31, 2024[12]. - The body system business recorded an 11% growth to RMB 1,035.3 million, representing 15% of total revenue, driven primarily by domain controller applications[14]. - The intelligent driving and networking business revenue grew by 27% year-on-year to RMB 513.9 million, accounting for 8% of total revenue, supported by rising OEM assembly rates[15]. - Revenue for the year ended December 31, 2024, increased to RMB 6,693,118 thousand, representing a growth of 15.4% compared to RMB 5,802,330 thousand in 2023[60]. - Revenue from mainland China was RMB 6,419,743 thousand, up from RMB 5,623,425 thousand in 2023, reflecting a growth of 14.2%[69]. Profitability and Margins - Gross profit was RMB 968.6 million, with a gross margin of 14.5%, down 4.2 percentage points from the previous year[11]. - Net profit attributable to shareholders was RMB 208.6 million, a decrease of 34% compared to RMB 317.4 million in the previous year, resulting in a net profit margin of 3.1%[11]. - Basic and diluted earnings per share were both RMB 19.18, reflecting a 34% decline from the previous year[3]. - The gross profit decreased by 11% to RMB 968.6 million, with the gross margin dropping from 18.7% in 2023 to 14.5% in 2024[29]. - Net profit decreased by 35% to RMB 204.2 million from RMB 312.5 million in the previous year, attributed to lower gross margins[36]. - Other income and gains fell by 44% to RMB 46.4 million, primarily due to a decrease in fair value gains on financial assets[30]. - The group reported a pre-tax profit of RMB 492,441 thousand for 2024, down from RMB 531,950 thousand in 2023, a decrease of 7.4%[78]. Research and Development - The company maintained R&D expenses at 7.4% of total revenue, amounting to RMB 493.1 million[11]. - R&D expenses for the year were RMB 493.1 million, a decrease of 5.2% year-on-year, representing approximately 7.4% of total revenue[19]. - The company has achieved significant advancements in R&D capabilities, including the establishment of a new testing system compliant with IEC61000-4-4/5 and GB/T17626.4/5 standards[20]. - The Nantong R&D base, covering over 13,000 square meters, has commenced trial operations for electric control power modules and is set to expand its capacity by 2026[21]. - The company plans to continue high R&D investment, maintaining a "light asset, heavy R&D" strategy to enhance research efficiency and product quality[24]. Financial Position and Costs - Financial costs increased by 11% year-on-year due to higher loan amounts associated with business expansion[11]. - Administrative expenses for the year amounted to RMB 561.4 million, a decrease of 6% compared to 2023, with R&D expenses totaling RMB 493.1 million, representing 7.4% of revenue, down 5% year-over-year[32]. - Financing costs increased by 11% to RMB 110.8 million due to increased bank borrowings to support business development and ensure sufficient working capital[34]. - As of December 31, 2024, cash and cash equivalents totaled RMB 916.2 million, up from RMB 517.0 million in 2023, with net current assets valued at RMB 1,716.4 million[37]. - The company’s net debt-to-equity ratio improved to 50% from 51% in the previous year, with outstanding bank loans increasing to RMB 2,038.4 million[37]. - The total current tax expense for mainland China in 2024 is RMB 91,000, a decrease from RMB 123,000 in 2023[83]. Employee and Corporate Governance - As of December 31, 2024, the group employed 1,308 employees, a decrease from 1,539 employees as of December 31, 2023[45]. - The total employee cost amounted to RMB 584.9 million, representing 8.7% of the group's revenue for the year, compared to RMB 597.7 million in 2023[45]. - The board proposed a final dividend of HKD 0.063 per share for the year ended December 31, 2024, down from HKD 0.098 per share in 2023[55]. - The company has maintained a public float of at least 25% of its issued share capital as required by listing rules[58]. - The company has complied with all applicable corporate governance code provisions, except for the separation of the roles of Chairman and CEO[48]. Market and Strategic Initiatives - The company is focusing on enhancing its market share and cost control through increased production and diversified solutions[11]. - The group aims to deepen cooperation with leading AI chip manufacturers to enhance domestic technology applications and innovations[17]. - The group has established long-term partnerships with international leading component suppliers for intelligent driving development projects, aiding in international market expansion[16]. - The intelligent driving network solutions business is expected to grow, with collaborations with semiconductor partners like Infineon and Horizon yielding results[23]. - The company anticipates adding over 150 new mass production projects, focusing on export markets and international business expansion[25]. Other Financial Information - The total assets as of December 31, 2024, amounted to RMB 6,110,273 thousand, an increase from RMB 5,543,352 thousand in 2023[62]. - Current assets increased to RMB 5,037,226 thousand, up from RMB 4,570,992 thousand in the previous year, indicating a growth of 10.2%[62]. - Non-current liabilities totaled RMB 308,219 thousand, up from RMB 285,885 thousand in 2023, reflecting an increase of 7.8%[63]. - The total equity attributable to the parent company owners increased to RMB 2,479,826 thousand from RMB 2,352,790 thousand in 2023, a growth of 5.4%[63]. - The group recognized contract liabilities of RMB 48,433 thousand in 2024, down from RMB 81,787 thousand in 2023, a decrease of 40.7%[73]. - The group received government grants totaling RMB 12,777 thousand in 2024, compared to RMB 11,531 thousand in 2023, an increase of 10.8%[77].

Summary of Conference Call Company and Industry Overview - The company operates primarily in two segments: traditional automotive business and automotive electronics business, with the latter experiencing rapid growth [1][2] - The goal is to become a leading automotive electronics solution provider in China, focusing on research and development [1] Key Points and Arguments - The automotive electronics segment includes various fields such as electrification, airbag systems, and digitalization, with a focus on expanding into markets like Australia and Chongqing [2] - The company has made significant progress with key clients such as Geely and BYD, particularly in providing electric drive modules [3] - A standout product is the integrated industrial module, which aligns with industry trends towards modularization [4] - The company emphasizes cross-system product integration, leveraging its historical expertise in wire bonding technology [5][6] - The automotive electronics business is projected to grow significantly, with expectations of revenue reaching over 2 billion yuan next year [13] - The company is adapting to the trend of domestic chip production, with a focus on MCU design and collaboration with local suppliers [14][15] Financial Performance - The automotive electronics segment currently accounts for approximately 30% of total revenue, with expectations for this to increase to around 40% in the near future [11][35] - The gross margin for automotive electronics is higher than the overall average, estimated at around 17% [27] - The company has maintained a consistent dividend payout ratio of 30% over the past two years [25] Market Dynamics - The company faces pricing pressures from clients due to competitive market conditions, particularly from companies like BYD [28][30] - The overall market is seeing a shift as some competitors struggle, leading to a more favorable competitive landscape for the company [30] Strategic Initiatives - The company is pursuing a light-asset model, focusing on design and outsourcing production to enhance efficiency and reduce capital expenditure [20][21] - There are ongoing discussions with overseas companies to provide technical solutions while localizing PCB production [22] - The company is also exploring talent acquisition over mergers and acquisitions to strengthen its workforce [26] Additional Insights - The company is actively managing its cash flow and working capital, with a focus on controlling the scale of its distribution business to mitigate risks [36][37] - The development cycle for new projects can take between six months to two years, depending on the complexity of the technology involved [23] This summary encapsulates the key insights from the conference call, highlighting the company's strategic direction, financial performance, and market positioning within the automotive electronics industry.

Financial Performance - In the first half of 2024, the company's revenue increased by approximately 8% to RMB 2.84 billion, driven by growth in the new energy vehicle and intelligent driving sectors[6]. - The new energy vehicle segment's revenue rose by 15.9%, accounting for 51.2% of total revenue[6]. - The overall gross profit was RMB 452 million, down 16.5% year-on-year, with a gross margin of 15.9%, a decrease of 4.7 percentage points compared to the previous year[7]. - The company reported a net profit attributable to shareholders of RMB 97.7 million for the first half of 2024, down from RMB 154.5 million in the same period last year, resulting in a net profit margin of 3.4%[8]. - Total revenue for the six months ended June 30, 2024, was RMB 2,835.0 million, an 8% increase year-over-year, driven by strong performance in the new energy and intelligent driving sectors[20]. - Gross profit decreased by 16% to RMB 452.0 million, with a gross margin of 15.9%, down from 20.6% in the previous year[21]. - Profit for the period decreased by 37% to RMB 95.1 million, down from RMB 152.1 million in the same period last year[30]. - The net profit for the six months ended June 30, 2024, was RMB 95,093 thousand, a decrease of 37.47% from RMB 152,114 thousand in the prior year[65]. - Basic earnings per share for the period was RMB 8.98, down from RMB 14.21 in the same period last year, reflecting a decline of 36.67%[65]. Revenue Segmentation - The cloud server solutions segment experienced a revenue increase of 24.9% due to rising demand driven by the widespread application of artificial intelligence technologies[6]. - The body system business recorded a revenue growth of 1.4% to RMB 422.7 million, accounting for 14.9% of total revenue[11]. - The intelligent driving and networking business revenue reached RMB 229.9 million, a 13% increase, representing 8.1% of total revenue[12]. - Revenue from the new energy segment reached RMB 1,452.6 million, a 16% increase compared to RMB 1,253.0 million in the same period last year[20]. - Revenue from external customers in Hong Kong reached RMB 115,311 thousand, a significant increase from RMB 13,054 thousand in the previous year[81]. - Revenue from mainland China was RMB 2,698,257 thousand, slightly up from RMB 2,613,056 thousand, reflecting a growth of 3.26%[81]. Research and Development - Research and development expenses accounted for 7.6% of total revenue, totaling RMB 215 million, reflecting the company's commitment to maintaining its competitive edge[7]. - R&D expenses amounted to RMB 215.0 million, a decrease of 7.5% year-on-year, accounting for approximately 7.6% of total revenue[15]. - The group plans to continue investing in research and development while expanding its R&D centers, focusing on advanced power semiconductor applications and autonomous driving solutions[19]. - The group established a research and development center in Hong Kong in 2023, focusing on intelligent driving software and advanced power semiconductor applications[17]. Market Trends and Outlook - The automotive market in China saw a total sales volume of 14.047 million vehicles in the first half of 2024, a year-on-year increase of 6.1%[5]. - The export volume of vehicles reached 2.793 million, marking a significant year-on-year growth of 30.5%[5]. - The global sales of new energy vehicles are projected to reach 17 million units in 2024, indicating stable growth in demand over the next decade[18]. - The group maintains a positive outlook for the cloud server business, anticipating increased demand for computing power due to the rise of artificial intelligence[19]. Financial Position and Cash Flow - As of June 30, 2024, cash and cash equivalents amounted to RMB 732.5 million, up from RMB 517.0 million at the end of 2023[31]. - The company’s total equity as of June 30, 2024, was RMB 2,364,938,000, slightly up from RMB 2,358,654,000 at the end of 2023, indicating a growth of approximately 0.26%[71]. - The net cash flow from operating activities was RMB 82,813,000, a significant increase from RMB 7,573,000 for the same period in 2023, representing a growth of approximately 989%[73]. - The total liabilities as of June 30, 2024, were RMB 3,086,817 thousand, compared to RMB 2,898,813 thousand at the end of 2023, reflecting an increase of 6.49%[69]. - The company’s cash and cash equivalents increased to RMB 732,486 thousand from RMB 516,998 thousand, representing a significant rise of 41.59%[69]. Shareholder Information - The major shareholder Magnate Era Limited holds 525,000,000 shares, representing approximately 48.26% of the total shares[45]. - The total equity held by Mr. Lu and Mr. Chen, the controlling shareholders, is 643,970,000 shares, representing 59.20% of the total shares[48]. - The company has issued a total of 73,544,550 stock options to eligible employees to enhance compensation attractiveness and incentivize performance[39]. - The company did not declare any interim dividends for the review period[32]. Corporate Governance - The company is committed to maintaining high standards of corporate governance to protect shareholder interests and enhance corporate value[59]. - The company has maintained a consistent approach to measuring financial instruments, ensuring transparency in its financial reporting[128].

Investment Rating - The report maintains a "BUY" rating for Intron (01760.HK) with a target price of HK$ 1.95, down from a previous target of HK$ 2.85 [3][4]. Core Insights - Intron faced a challenging first half of 2024, with revenue growth slowing to 8% year-on-year and a significant drop in gross margin to 15.9%, resulting in a net margin of 3.4% [3][4]. - The automotive market's sluggishness has adversely affected Intron's performance, particularly in the Advanced Driver Assistance Systems (ADAS) and new energy vehicles (NEV) segments, which were previously key growth drivers [4]. - Despite increasing penetration rates for NEVs, intense price competition has pressured profit margins and hindered original equipment manufacturers (OEMs) from upgrading ADAS hardware [4]. - The report anticipates a potential recovery in 2025, driven by the mass production of new solutions and a significant year-on-year increase in revenue from rendering services, which grew by 83.4% [4][3]. Revenue Breakdown - Intron's revenue segments showed varied performance, with NEV growth at 13.0%, Body Control at 24.9%, Safety at -8.9%, Powertrain at -26.3%, and Automated & Connected Vehicles at 15.9% [4]. - The overall revenue for 2024 is projected to be RMB 6,277.2 million, with a year-on-year growth of 8.2% [10]. Financial Performance - The gross profit for 2024 is estimated at RMB 1,002.7 million, with a gross margin of 16.0% [10]. - Net profit is projected to decline by 31.9% year-on-year to RMB 212.9 million in 2024, with a subsequent recovery expected in 2025 [10]. - The report highlights a significant drop in the company's stock performance, with a 63.9% decline over the past year [4]. Market Context - The report notes that Intron's pricing strategies have limited room for improvement due to fierce competition in the automotive market, particularly in the ADAS segment [4]. - The anticipated mass production of the "Motor Control Unit Power Brick" in the second half of 2025 is expected to contribute positively to revenue and profit margins in 2026 [4].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HK$ 1.95, reflecting a downward adjustment from the previous target of HK$ 2.85 [1]. Core Insights - The company experienced a disappointing revenue growth of 8% in the first half of 2024, with a further decline in gross margin to 15.9% and net profit margin dropping to 3.4% [1]. - Revenue growth was the lowest since 2021, primarily due to weak performance in the automotive market, which negatively impacted the company's key revenue segments: new energy and intelligent driving [1]. - Despite the increasing penetration rate of new energy vehicles, intense price competition has compressed profit levels for upstream participants, limiting growth potential for the company [1]. - The report indicates that the company needs to enhance pricing and offer upgraded product combinations to achieve significant improvement, although a major turnaround is unlikely before downstream price wars improve [1]. - Positive signals for recovery are anticipated in 2025, with new solutions expected to contribute significantly to profits by 2026 [1]. Summary by Sections Financial Performance - Revenue for 2024 is projected at RMB 6,277.2 million, with a year-on-year growth of 8.2% [5]. - Gross profit is expected to be RMB 1,002.7 million, with a gross margin of 16.0% [5]. - Net profit is forecasted to decline by 31.9% to RMB 212.9 million in 2024 [5]. Market Position - The company holds a market capitalization of approximately HK$ 1.3 billion [1]. - The report highlights the competitive landscape, noting that the average price-to-earnings ratio for similar companies is significantly higher, indicating potential undervaluation [2]. Future Outlook - The company is expected to see initial recovery in 2025, with profit margins normalizing by 2026 as new solutions are launched [1]. - The anticipated increase in the proportion of self-produced batteries by GAC is expected to bring more orders to the company [1].

Investment Rating - The report maintains a "Buy" rating for Intron Tech with a target price of HK$2.35, down from the previous target of HK$5.53, reflecting a significant potential upside from the current price of HK$1.2 [4][13]. Core Insights - Intron Tech reported revenue of RMB 2.84 billion for the first half of fiscal year 2024, representing an 8% year-on-year increase, but net profit decreased by 37% to RMB 977 million due to increased competition and pricing pressure from automotive OEMs, leading to a gross margin decline to 15.9% [1][2]. - The management expects a recovery in net profit margins in the second half of fiscal year 2024, driven by new orders in the new energy and ADAS sectors, as well as expansion into overseas markets [2][4]. - The report has adjusted earnings per share forecasts for fiscal years 2024 and 2025 down by 43%-49% due to the weak performance in the first half of 2024 and anticipated cost pressures [2][4]. Revenue Summary - Intron Tech's revenue is projected to grow by 9% year-on-year in fiscal year 2024, while net profit is expected to decline by 29% [2][12]. - The revenue breakdown shows strong growth in the new energy (16%), automation and connectivity (13%), and cloud server segments (25%), while body control, safety, and powertrain segments experienced weaker growth [1][11]. - The gross profit margin for the first half of 2024 was 15.9%, down from 20.6% in the same period last year, reflecting pressures in the automotive supply chain [1][12]. Financial Projections - For fiscal year 2024, revenue is estimated at RMB 6.32 billion, with a gross profit of RMB 1.02 billion and a net profit of RMB 225 million [9][10]. - The projected earnings per share for fiscal year 2024 is RMB 0.21, with a significant decrease from previous estimates [10][12]. - The report anticipates a gradual recovery in profit margins in fiscal year 2025, with net profit expected to rise to RMB 371 million [2][9]. Valuation Metrics - Intron Tech's current price-to-earnings ratios are 5.4x for fiscal year 2024 and 3.2x for fiscal year 2025, which are considered attractive compared to industry peers [2][13]. - The report highlights that Intron Tech is undervalued, especially given its high return on equity (ROE) levels [13].

Investment Rating - The report maintains a "BUY" rating for Intron Tech [15][16]. Core Insights - Intron Tech reported 1H24 revenue of RMB 2.84 billion, an 8% year-over-year increase, but net profit fell to RMB 97.7 million, a 37% decline year-over-year, primarily due to a gross profit margin (GPM) decline to 15.9% [1][19]. - The company expects a recovery in net profit margin in 2H24E driven by new order wins in new energy and ADAS, as well as expansion into overseas markets [1][15]. - The target price has been adjusted to HK$ 2.35, based on a lowered 10x FY24E P/E, reflecting near-term industry headwinds [1][15]. Financial Performance - 1H24 revenue growth was driven by strong performance in the new energy segment, which grew 16% year-over-year, while other segments like body control and powertrain saw declines [1][12]. - The GPM for 1H24 was 15.9%, down from 20.6% in 1H23, indicating pricing pressures along the auto supply chain [1][19]. - The report projects FY24E revenue to be RMB 6.32 billion, with a net profit of RMB 225 million, reflecting a 29% decline year-over-year [10][19]. Segment Analysis - The new energy segment is expected to continue its growth trajectory, with revenue projected to reach RMB 3.26 billion in FY24E, reflecting a year-over-year growth of 17.1% [12][19]. - The body control segment is projected to grow modestly, with revenue expected to reach RMB 951 million in FY25E, reflecting a 5% year-over-year increase [12][19]. - The powertrain segment is anticipated to face challenges, with a projected revenue decline of 23.1% in FY24E [12][19]. Valuation Metrics - Intron Tech is currently trading at 5.4x FY24E P/E and 3.2x FY25E P/E, which is considered attractive compared to peers in the automobile components sector [15][16]. - The report highlights that Intron's high return on equity (ROE) levels further support its undervaluation [15][16]. Upcoming Catalysts - Key catalysts for future growth include increased penetration of ADAS technologies and gaining market share among new energy vehicle clients [1][15].

Financial Performance - The total revenue for the first half of 2024 reached RMB 2,835.0 million, representing an 8% year-on-year increase from RMB 2,626.2 million[1]. - Net profit for the period was RMB 95.1 million, a decline of 37% compared to RMB 152.1 million in the same period last year[1]. - Gross profit decreased by 16% to RMB 451.9 million, with a gross margin of 15.9%, down 4.7 percentage points from the previous year[1][5]. - The net profit margin for the first half of 2024 was 3.4%, down from the previous year[5]. - Basic earnings per share for the period was RMB 8.98, down from RMB 14.21 in the previous year, reflecting a decline of 36.67%[36]. - Profit for the period decreased by 37% to RMB 95.1 million, down from RMB 152.1 million in the same period last year[23]. - Other income and gains fell by 19% to RMB 12.3 million, primarily due to a reduction in government subsidies compared to the previous year[17]. - Selling and distribution expenses were RMB 48.0 million, a 10% decrease year-on-year, attributed to cost control measures[18]. - Administrative expenses totaled RMB 248.8 million, down 9% from the previous year, with R&D expenses of RMB 215.0 million accounting for 7.6% of revenue[19]. - The total tax expense for the six months ended June 30, 2024, was RMB 27,134,000, compared to RMB 16,182,000 for the same period in 2023, indicating an increase of approximately 67.8%[52]. Revenue Segmentation - The revenue from the new energy vehicle segment increased by 15.9%, accounting for 51.2% of the total revenue[5]. - The revenue from the new energy vehicle solutions increased by 15.9% year-on-year to RMB 1,452.6 million for the six months ended June 30, 2024[6]. - The body system business recorded a 1.4% growth to RMB 422.7 million, accounting for 14.9% of total revenue, while the power system and safety system solutions saw declines of 26.3% and 8.9% respectively[7]. - The intelligent driving and networking solutions generated revenue of RMB 229.9 million, a 13% increase, representing 8.1% of total revenue[8]. - Revenue from cloud server-related electronic solutions surged by 24.9% to RMB 108.8 million, driven by the rapid development of artificial intelligence technology[9]. - Revenue from mainland China was RMB 2,698,257 thousand, up from RMB 2,613,056 thousand, indicating a growth of about 3.3% year-over-year[46]. Market Trends - The automotive market in China saw a total sales volume of 14.047 million vehicles in the first half of 2024, a year-on-year increase of 6.1%[2]. - The export volume of new energy vehicles reached 605,000 units, reflecting a year-on-year growth of 13.2%[2]. - The global sales of new energy vehicles are projected to reach 17 million units in 2024, indicating stable growth in demand over the next decade[13]. Research and Development - The company maintained R&D expenses at 7.6% of total revenue, amounting to RMB 215.0 million, to support long-term growth opportunities[5]. - Research and development expenses amounted to RMB 215.0 million, a decrease of 7.5%, representing approximately 7.6% of total revenue[10]. - The group established a research and development center in Hong Kong in 2023, focusing on intelligent driving software and advanced power semiconductor applications[12]. - The group optimized the MCU 4th generation software platform architecture, accelerating software integration speed by solidifying more standard modules[11]. - The group completed the development of a vehicle-grade wireless Bluetooth smart sensor solution, addressing interference issues in complex electrical environments[11]. Financial Health - As of June 30, 2024, the company maintained a strong liquidity position with cash and cash equivalents of RMB 732.5 million, up from RMB 517.0 million at the end of 2023[24]. - The company did not declare any interim dividends for the review period, consistent with the previous year[26]. - The group expects to fully utilize the remaining unutilized net proceeds by the end of 2025 due to economic uncertainties[29]. - The company reported a decrease in trade receivables to RMB 1,647,149 thousand from RMB 1,848,235 thousand, a decline of 10.89%[38]. - The company’s equity attributable to owners of the parent was RMB 2,361,658 thousand as of June 30, 2024, compared to RMB 2,352,790 thousand as of December 31, 2023, reflecting a growth of about 0.4%[40]. Employee and Governance - As of June 30, 2024, the group employed 1,373 employees, a decrease from 1,517 employees as of June 30, 2023[27]. - Employee costs totaled RMB 199.3 million, representing 7.0% of the group's revenue during the period[27]. - The company has adopted the corporate governance code as per the listing rules and believes that its governance structure is appropriate despite deviations from certain provisions[32]. Strategic Initiatives - The company established a comprehensive testing and verification base in Nantong, Jiangsu Province, which began operations in 2023, enhancing its capabilities in power module packaging and assembly[10]. - The company is set to begin mass delivery of its new "motor controller power brick" solution by the end of this year, which is expected to enhance vehicle performance and reduce system costs[6]. - The group plans to enhance its market share and performance by developing innovative new energy solutions, including power bricks[13]. - The group aims to strengthen product localization and international market expansion to sustain long-term growth[14]. - The group emphasizes collaboration with leading chip suppliers to enhance product quality and industrial effectiveness[14].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HK$ 2.85, down from a previous target of HK$ 6.13 [2][11]. Core Insights - The company, 英恒科技 (01760.HK), experienced a decline in gross margin by 2.9 percentage points year-on-year to 18.7%, which was below expectations and significantly lower than the average gross margin [2]. - The slowdown in revenue growth was noted across various business segments, with the new energy segment remaining the primary revenue contributor, while the intelligent driving network was identified as the main growth driver [2]. - The company has faced intense competition, leading to a shift in pricing strategy to cope with market pressures, resulting in a gross margin of only 17.1% for the second half of the fiscal year 2023 [2]. - The report indicates a significant reduction in profit forecasts by approximately 51% to 58% due to the challenges faced, including low gross margins and high R&D expenditures [2]. Financial Summary - For the fiscal year 2023, the company achieved total revenue of RMB 5.8 billion, representing a year-on-year growth of 20.1% [11]. - The projected revenues for the upcoming years are RMB 6.84 billion in 2024, RMB 7.52 billion in 2025, and RMB 8.17 billion in 2026, with respective growth rates of 17.9%, 10.0%, and 8.6% [15]. - The net profit for 2023 is projected to decline by 24.0%, with further reductions expected in 2024 and 2025 [15]. Operational Challenges - The company is experiencing increased operational capital pressure due to rising financing costs and a longer cash conversion cycle, which has led to a higher net debt-to-equity ratio of 48.1% [2][14]. - The report highlights that the company has not seen signs of improvement in the first quarter of 2024 amidst ongoing price wars in the downstream market [2]. Market Position - The company is positioned within a highly competitive landscape, with significant pressure on product pricing and profit margins due to aggressive competition in the automotive sector [4][22]. - The report notes that the company’s pricing strategy has been adjusted to "cost + ~20%" but has not yielded significant changes in market conditions [2]. Conclusion - Overall, the report reflects a cautious outlook on the company's performance, emphasizing the need for strategic adjustments to navigate the challenging market environment while maintaining a "Buy" rating based on potential recovery and growth opportunities [2].

Investment Rating - The report maintains a "BUY" rating for Intron (01760.HK) with a target price of HKD 2.85 per share, down from HKD 6.13 [2][10]. Core Insights - Intron reported a year-on-year revenue increase of 20.1% to RMB 5,802.3 million for FY 2023, but the gross margin fell by 2.9 percentage points to 18.7%, which was lower than estimates [3][4]. - The company experienced a significant decline in net profit, retreating by 23.0% year-on-year, attributed to increased R&D expenses and a competitive pricing environment [4][10]. - The revenue growth was driven primarily by NEV Solutions, but competition led to manufacturers opting for lower-cost solutions, impacting growth in advanced driver-assistance systems (ADAS) [4][10]. - A shift in pricing strategy was noted, with a gross margin of 17.1% in the second half of 2023, indicating adjustments to cope with market pressures [4][10]. - The report anticipates continued challenges in 2024, with profit margins expected to remain under pressure due to lower gross margins and high R&D expenses [4][10]. Financial Summary - Revenue projections for the next few years are as follows: RMB 6,840.5 million in 2024, RMB 7,524.0 million in 2025, and RMB 8,174.4 million in 2026, reflecting a year-on-year growth rate of 17.9%, 10.0%, and 8.6% respectively [15]. - The gross profit is projected to increase from RMB 1,083.6 million in 2023 to RMB 1,247.8 million in 2024, with gross margins expected to stabilize around 18.8% in 2026 [15][17]. - The net profit is forecasted to decline significantly in 2024, with estimates of RMB 219.4 million, before recovering to RMB 301.3 million in 2025 and RMB 398.7 million in 2026 [15]. Operational Outlook - The report indicates a cautious operational outlook, with estimates cut by 51% to 58% due to ongoing difficulties, including lower gross margins and increased financial expenses [4][10]. - The company is expected to face a tightening working capital situation due to a longer cash conversion cycle and high R&D expenses [13][17].