Hongfa(SH:600885) HTSC·2024-08-09 01:03Investment Rating - The report maintains a "Buy" rating for the company with a target price of 40.32 RMB [6][7]. Core Views - The company achieved a robust performance in H1 2024, with revenue of 7.231 billion RMB (up 8.89% YoY) and net profit of 844 million RMB (up 15.33% YoY) [1]. - The company is a global leader in electromagnetic relays, benefiting from strong demand in various sectors, including smart electric meters and automotive markets [3][4]. - The report projects EPS for 2024, 2025, and 2026 to be 1.61 RMB, 1.89 RMB, and 2.28 RMB respectively, with a PE ratio of 25 times for 2024 [1][5]. Summary by Sections Financial Performance - In Q2 2024, the company reported revenue of 3.778 billion RMB (up 11.89% YoY) and net profit of 488 million RMB (up 21.56% YoY) [1]. - The overall gross margin for H1 2024 was 36.15%, a decrease of 0.72 percentage points YoY, primarily due to rising raw material costs [2]. Market Demand - The demand for power relays is increasing due to the rapid growth in the global smart electric meter market, with a capacity utilization rate exceeding 90% [3]. - The automotive sector is also experiencing significant growth, with the company's low-voltage automotive relay business benefiting from increased demand and market share [3]. Product Development - The company is implementing its "75+" strategy, with notable growth in new product categories such as film capacitors (up 20% YoY) and connectors (up 129% YoY) [4]. - The report highlights the company's ongoing efforts to expand its product lines and improve profitability through scale [4].