NCE(SH:605111)2024-08-14 09:37Investment Rating - The report maintains a "Buy" rating for the company, with an updated target price of RMB 38.7, indicating a potential upside of 22% [1][3]. Core Insights - The company's products are in high demand due to a recovery in downstream sectors such as consumer electronics and industrial applications, as well as growth in automotive electronics and AI servers. The company is expected to benefit from product structure optimization, price increases, and cost reductions in the second half of the year [1][6]. - The second quarter performance exceeded expectations, with revenue growth of 35% quarter-on-quarter and 30% year-on-year, leading to a net profit of RMB 118 million, a 42% increase year-on-year [1][6]. - The company is positioned for a supply-demand imbalance, with expectations for further capacity expansion in the coming year [1][7]. Financial Performance Summary - Revenue Forecast: Projected revenues for 2024 are RMB 1,923 million, with a year-on-year growth rate of 30% [2][7]. - Gross Margin: Expected gross margin for 2024 is 36.4%, improving from 30.8% in 2023 [2][7]. - Net Profit: Forecasted net profit for 2024 is RMB 466 million, reflecting a 44% increase compared to 2023 [2][7]. - Earnings Per Share: Basic earnings per share are projected to be RMB 1.12 for 2024, up from RMB 0.84 in the previous forecast [7]. Valuation and Estimates - The report employs a DCF valuation method, assuming a WACC of 9.0% and a perpetual growth rate of 3%. The target price of RMB 38.7 is derived from these assumptions [1][8]. - The company’s current P/E ratio is 28x for 2024, which is considered attractive compared to historical averages [1][11]. Market Outlook - The company is expected to see strong demand in industrial applications, with significant recovery in consumer electronics and automotive sectors. The AI computing segment is also anticipated to grow substantially in the coming years [1][6]. - The report highlights the potential for further growth in the company's automotive electronics and AI server businesses, maintaining a positive long-term outlook [1][6].