LY iTECH(SZ:002600)2024-09-11 06:44Investment Rating - The report maintains a "Buy" rating for the company, indicating an expectation that the company's stock price will outperform the benchmark index by more than 20% in the next 6-12 months [4][10]. Core Views - The company reported steady revenue growth in the first half of 2024, with revenue reaching RMB 19.12 billion, a year-on-year increase of 25%. However, net profit declined by 45% to RMB 690 million due to changes in product structure affecting profitability [4]. - The company is well-positioned to benefit from emerging trends in edge AI and foldable screens, which are expected to drive new growth opportunities [4]. Summary by Sections Financial Performance - In H1 2024, the company achieved a revenue of RMB 19.12 billion, up 25% year-on-year, while net profit fell to RMB 690 million, down 45% year-on-year. The gross margin was 15.0%, a decrease of 5.5 percentage points [4]. - For Q2 2024, revenue was RMB 9.32 billion, a 15% increase year-on-year but a 5% decrease quarter-on-quarter. Net profit for the quarter was RMB 230 million, down 62% year-on-year and 50% quarter-on-quarter [4]. Cost Management - The company effectively controlled its expense ratios in H1 2024, with a sales expense ratio of 0.8%, a management expense ratio of 3.2%, and a research and development expense ratio of 4.8% [4]. Product and Market Trends - The decline in gross margin is attributed to changes in product structure, with AI terminal and communication businesses generating RMB 17.64 billion in revenue, a 30% increase year-on-year, but with a gross margin of 16.5%, down 5.2 percentage points [4]. - The automotive business saw revenue growth of 43% to RMB 1.02 billion, driven by the expanding global electric vehicle market. Conversely, the photovoltaic energy storage business revenue dropped by 56% to RMB 400 million due to a decline in customer orders [4]. Future Growth Opportunities - The report highlights the potential of edge AI technology and foldable screens as new growth drivers. The global VC thermal plate market is projected to grow at a CAGR of 24%, from USD 310 million in 2022 to USD 590 million in 2025 [4]. - The foldable screen market is also showing promise, with a 49% year-on-year increase in global foldable smartphone sales in Q1 2024, marking the highest growth rate in six quarters [4]. Valuation - Due to the pressure on gross margins in H1 2024, the company’s earnings forecast has been adjusted. Expected earnings per share for 2024-2026 are RMB 0.29, RMB 0.45, and RMB 0.56, corresponding to P/E ratios of 23.2x, 15.1x, and 12.0x respectively [4][5].