Wuxi Zhenhua(SH:605319) EBSCN·2024-08-19 01:09Investment Rating - The report maintains a "Buy" rating for Wuxi Zhenhua (605319.SH) [1][2] Core Views - The company's performance in 1H24 shows a revenue increase of 15.3% year-on-year to 1.12 billion yuan, with a net profit increase of 74.9% to 160 million yuan, driven by the ramp-up of new energy vehicle models from Xiaomi and Li Auto, as well as growth in the electroplating business [1][2] - The report highlights that the core customers, SAIC Motor and Tesla, are under pressure, but the company is optimizing its customer structure and benefiting from the growth of its electroplating business, which has opened a second growth curve [2][3] Summary by Sections Financial Performance - In 1H24, the company's revenue reached 1.12 billion yuan, accounting for 38% of the annual forecast, while net profit accounted for 40% of the annual forecast [1] - The revenue for 2Q24 was 630 million yuan, showing a year-on-year increase of 14.9% and a quarter-on-quarter increase of 27.9% [1] - The gross margin for 1H24 was 24.5%, with a slight year-on-year increase of 1.1 percentage points, although 2Q24 saw a decline in gross margin to 23.7% [1][2] Business Drivers - The report identifies two main drivers for growth: 1. Optimization of customer structure, with new energy vehicle models from Xiaomi and Li Auto contributing positively despite the decline in sales from core customers [2] 2. Significant growth in the electroplating business, which saw a revenue increase of 116% year-on-year to 90 million yuan, with a gross margin of 81.8% [2] Future Outlook - The report projects a downward revision of net profit forecasts for 2024E, 2025E, and 2026E by 12.6%, 7.1%, and 3.7% respectively, leading to new estimates of 350 million yuan, 430 million yuan, and 500 million yuan [2] - The target price is adjusted to 20.84 yuan, corresponding to a 15x PE for 2024E [2][3]