Investment Rating - The report maintains a "Buy" rating with a target price of HKD 45 per share, indicating a potential upside of 21.1% from the current price of HKD 37.2 [4][20]. Core Insights - The company's total revenue for H1 2024 reached RMB 11.25 billion, representing a year-on-year growth of 22.0%, with a gross margin of 21.5%, an increase of 7.4 percentage points compared to the previous year [7][33]. - The significant improvement in gross margin is attributed to the recovery in the smartphone market, product mix enhancements from acoustic, optical, and precision structural components, and operational efficiency gains [7][33]. - The acquisition of Premium Sound Solutions (PSS) has strengthened the company's automotive acoustic business, with substantial contributions from both domestic and international markets [11][33]. Financial Summary - Revenue projections for 2024 to 2026 are RMB 26.45 billion (+29.1%), RMB 29.93 billion (+13.2%), and RMB 33.86 billion (+13.1%) respectively [20][34]. - The net profit forecasts for the same period are RMB 1.69 billion (+128.6%), RMB 2.16 billion (+27.9%), and RMB 2.54 billion (+17.5%) respectively [20][34]. - The average net profit growth rate for the next two years is estimated at 23% [20][34]. Business Performance - The PSS-related business generated revenue of RMB 1.52 billion in H1 2024, with a gross margin of 25.0%, indicating that the automotive business is becoming a new growth engine for the company [13][33]. - The optical business achieved revenue of RMB 2.21 billion in H1 2024, a year-on-year increase of 24.9%, with significant improvements in gross margin [15][34]. - The company has successfully upgraded its optical technology, with a notable increase in the shipment of high-end plastic lenses [15][34].

Group 1 - The core viewpoint indicates that the acoustic upgrade trend and the increase in the penetration rate of AAC's master-level speakers are contributing to a slowdown in industry competition since the second half of 2023 [1] - The company is expected to improve its product structure and yield, leading to a reduction in optical losses, alongside the expansion of new business segments such as hinges, cooling, and laptop shells, as well as accelerated acquisition of PSS to enhance its automotive acoustic business [1] - Projected net profits for AAC from 2024 to 2026 are estimated at 1.67 billion, 2.17 billion, and 2.57 billion respectively, with year-on-year growth rates of 125.9%, 29.5%, and 18.7% [1] Group 2 - The company is experiencing a turning point in performance, with improvements in gross margins across all product lines [2] - Future benefits are anticipated from the AI smartphone trend, which is expected to drive hardware innovation upgrades [2] - The initial coverage has assigned a "buy" rating for the company [2]

Investment Rating - The report assigns a "Buy" rating to the company, indicating an expected strong performance relative to the market [7][245]. Core Insights - The company is experiencing a turning point in performance, with profit improvements exceeding expectations due to trends in acoustic upgrades, enhanced penetration of high-end speakers, and a slowdown in industry competition since H2 2023 [7][8]. - The company is expected to benefit from the AI smartphone trend, which will drive hardware innovation across multiple product lines [9]. Financial Forecast - The projected net profits for 2024, 2025, and 2026 are 1.67 billion, 2.17 billion, and 2.57 billion RMB respectively, with corresponding year-on-year growth rates of 125.9%, 29.5%, and 18.7% [7][221]. - The expected earnings per share (EPS) for the same years are 1.40, 1.81, and 2.15 RMB, with the current stock price of 37.05 HKD corresponding to price-to-earnings (P/E) ratios of 24.9, 19.3, and 16.2, slightly below the average of comparable companies [7][245]. Business Segments Acoustic Business - The acoustic segment is benefiting from the upgrade of mid-to-high-end Android speakers, with significant improvements in average selling price (ASP) and gross margins [8][9]. - The acquisition of PSS, a leading global provider of high-end automotive sound systems, is expected to open a second growth curve for the company [8][123]. Optical Business - The optical segment has seen a significant recovery in gross margins due to improved product structure and yield rates, with expectations for further improvements in 2024 [8][107]. - The company anticipates that the gross margin for plastic lenses will exceed 25% in H2 2024, driven by the increasing penetration of glass-plastic hybrid lenses [8][137]. Electromagnetic Transmission and Precision Structural Components - The company is expanding its precision structural components business, which includes hinges, heat dissipation solutions, and laptop casings, contributing to revenue growth [151][202]. - The electromagnetic transmission segment is expected to see significant growth due to the increasing demand for linear motors and the penetration of high-end models [189][240]. MEMS Microphone Business - The MEMS microphone market is projected to grow at a compound annual growth rate (CAGR) of 5% from 2023 to 2029, with the company positioned to benefit from the rising demand for high signal-to-noise ratio microphones in AI smartphones [43][125]. Market Trends - The global smartphone market is expected to see a significant increase in AI smartphone shipments, with a projected CAGR of 78.4% from 2024 to 2028 [184][207]. - The automotive acoustic system market is anticipated to exceed 90 billion RMB by 2025, driven by the increasing penetration of electric vehicles [99][123].

Core Insights - The company is experiencing significant growth in its acoustic and optical businesses, driven by market recovery and improved product offerings. Group 1: Acoustic Business - The acoustic business achieved revenue of RMB 3.46 billion in the first half of 2024, representing a year-on-year growth of 4.1%, primarily due to the recovery of the global smartphone market and increased shipment volumes [6] - The collaboration between PSS and the company is yielding positive results, with the automotive acoustic business showing continuous breakthroughs [7] - The high-end acoustic platform is being continuously integrated into key models, enhancing the product mix of the company [4] Group 2: Optical Business - The optical business generated revenue of RMB 2.21 billion in the first half of 2024, marking a substantial year-on-year increase of 24.9% [11] - The demand recovery in the smartphone optical industry, coupled with the company's increased market share in the mid-to-high-end segment, has significantly boosted optical business growth [2] Group 3: Electromagnetic Transmission and Precision Components - The electromagnetic transmission and precision components segment reported combined revenue of RMB 3.66 billion in the first half of 2024, reflecting a year-on-year growth of 1.1% [13] - The gross margin of the electromagnetic transmission business has significantly improved, benefiting from the company's high-performance linear motors and enhanced product mix [3] - The company is continuously optimizing the product structure of precision components, with high-end motor products seeing sustained growth [8] Group 4: MEMS Microphones - The MEMS microphone segment for smartphones has significant potential, especially with the rise of AI technologies [9] - The top three manufacturers of smartphone MEMS microphones have shipped over 7 billion units to date [12] Group 5: PSS Business Performance - The PSS-related business reported revenue of RMB 1.52 billion, with a gross margin of 25.0% [10]

Investment Rating - The report gives a "Buy" rating for the company, with expected PE ratios of 24x, 18x, and 15x for 2024, 2025, and 2026 respectively [7][10] Core Views - The company's acoustic business achieved revenue of RMB 3.46 billion in H1 2024, up 4.1% YoY, with gross margin improving by 4.4 percentage points to 29.9% [2] - The optical business saw significant growth, with revenue increasing 24.9% YoY to RMB 2.21 billion in H1 2024, and gross margin improving by 21.7 percentage points to 4.7% [2] - The company's MEMS microphone business continues to lead the industry, with high-value products accounting for over 60% of Android shipments, up 15 percentage points YoY [11] - The PSS automotive and consumer acoustic business achieved revenue of RMB 1.52 billion with a gross margin of 25.0%, showing increasing synergies with the group [2] Financial Performance - Revenue is expected to grow from RMB 26.03 billion in 2024 to RMB 33.00 billion in 2026, with net profit attributable to shareholders increasing from RMB 1.71 billion to RMB 2.70 billion [7][33] - EPS is projected to rise from RMB 1.43 in 2024 to RMB 2.25 in 2026, with P/E ratios declining from 23.87x to 15.12x over the same period [33] - Gross margin is forecast to improve from 21.55% in 2024 to 22.49% in 2026, driven by product mix optimization and cost control [30] Business Segments Acoustic Business - SLS master-level speakers maintained rapid growth, with shipments exceeding 12 million units, up nearly 200% YoY [2] - The innovative Combo series of acoustic and electromagnetic products shipped close to 4.5 million units [2] - The company launched industry-leading thin speakers for foldable devices, gaining major share in multiple customers' foldable models [2] Optical Business - 6P lens shipments maintained over 15% of total plastic lens shipments, with 1G6P hybrid lens shipments reaching 1.4 million units, up nearly 40% YoY [29] - The company's WLG process received positive feedback from smartphone manufacturers for its efficiency and precision [29] - Optical module revenue grew 29% YoY in H1 2024, driven by both volume and price improvements [29] MEMS Microphone Business - The company has shipped over 7 billion MEMS microphones, maintaining its position as a top-three global manufacturer [11] - High-value MEMS microphone products accounted for over 60% of Android shipments, up 15 percentage points YoY [11] - The company is well-positioned to benefit from AI-driven demand for advanced voice interaction technologies [11] Automotive and Consumer Acoustic Business - PSS products cover a wide range of high-performance automotive speakers, with the company expanding its presence among global top-tier automakers [2] - The business is expected to benefit from the rapid growth of the new energy vehicle market, with domestic NEV sales up 32% YoY in H1 2024 [2] Electromagnetic and Precision Components - Revenue from this segment reached RMB 3.66 billion in H1 2024, with gross margin improving by 3.6 percentage points to 22.9% [29] - High-end motor products and optimized product structure contributed to margin improvement [29] - The company shipped nearly 500,000 hinge products in H1 2024, with innovative foldable screen hinge solutions setting industry benchmarks [29]

Group 1 - The core viewpoint of the report is that the target price for AAC Technologies has been raised from HKD 38.6 to HKD 47.7, and it has been included in the preferred list of Chinese technology H-shares [1] - The report highlights that AAC Technologies is benefiting from market recovery, cost control, and product mix improvement, with expectations for continued growth in revenue and profit margins [1] - The implementation of mobile phone subsidies by the mainland government is expected to make the company a major beneficiary [1]

Core Viewpoint - Goldman Sachs predicts that AAC Technologies' revenue will increase by 42% year-on-year in the second half of the year, with an overall revenue growth of 33%, exceeding market expectations [1] Group 1: Revenue Growth - The growth is primarily driven by the increased contribution from 6P lenses and the boost from the Premium Sound Solutions automotive business [1] - The company is enhancing its profitability through product upgrades and production line expansions, including acoustic components for foldable phones and haptic devices for automotive steering wheels [1] Group 2: Profitability Outlook - Goldman Sachs holds an optimistic view on the company's profitability prospects, raising the target price for AAC Technologies to HKD 47 and maintaining a "Buy" rating [1]

Investment Rating - The report assigns a "Buy" rating for the company, with a target price of HKD 39.09, indicating a potential upside of 26.10% from the current price of HKD 31.00 [1]. Core Insights - The company reported a positive performance in the first half of 2024, achieving revenue of RMB 11.25 billion, a year-on-year increase of 22.0%, and a net profit of RMB 5.4 billion, with a gross margin of 21.5% [1]. - The recovery in the smartphone market, along with the strong product mix in acoustics, optics, and precision structural components, is expected to drive growth in the second half of 2024 [1]. - The optical business is projected to turn profitable by the end of 2024, with revenue reaching RMB 2.21 billion, a year-on-year increase of 24.9% [1]. - The acoustic business continues to expand, with revenue of RMB 3.46 billion, a growth of 4.1% year-on-year, benefiting from high-end product upgrades [1]. Financial Summary - The company achieved total revenue of RMB 20.63 billion in 2022, with a projected increase to RMB 26.03 billion in 2024 and RMB 29.24 billion in 2025 [2]. - Gross profit for 2022 was RMB 3.78 billion, with a gross margin of 18.3%, expected to improve to 22.5% by 2024 [2]. - Net profit for 2022 was RMB 821.3 million, with projections of RMB 1.68 billion in 2024 and RMB 2.13 billion in 2025 [2]. - The company’s total assets were RMB 40.33 billion in 2022, projected to grow to RMB 48.52 billion by 2026 [2].

Financial Performance - Revenue for the first half of 2024 increased by 22.0% year-on-year to RMB 11,246,971 thousand[7] - Net profit attributable to owners of the company surged by 257.3% to RMB 537,028 thousand in the first half of 2024[7] - EBITDA grew by 29.0% to RMB 2,397,859 thousand compared to the same period in 2023[7] - Gross margin improved by 7.4 percentage points to 21.5% in the first half of 2024[7] - Total revenue for the first half of 2024 reached RMB 11.25 billion, a year-on-year increase of 22.0%, with a gross margin of 21.5%, up 7.4 percentage points[8] - Net profit for the first half of 2024 was RMB 537 million, a significant year-on-year increase of 257.3%[8] - Gross profit surged 86.4% YoY to RMB 2.42 billion in H1 2024, with gross margin improving from 14.1% to 21.5%[20] - Net profit attributable to shareholders rose over 2.5x YoY to RMB 537 million in H1 2024[25] - EBITDA increased by 17.1% YoY to RMB 4.722 billion for the 12 months ending June 30, 2024[26] - Operating cash flow improved to RMB 2.651 billion in H1 2024, up from RMB 2.054 billion in H1 2023[27] - Revenue for the first half of 2024 reached RMB 11,246.971 million, a 22% increase compared to RMB 9,218.944 million in the same period of 2023[118] - Gross profit for the first half of 2024 was RMB 2,417.751 million, up 86% from RMB 1,297.038 million in the first half of 2023[118] - Net profit attributable to the company's owners for the first half of 2024 was RMB 537.028 million, a 257% increase from RMB 150.304 million in the same period of 2023[118] - Basic earnings per share for the first half of 2024 were RMB 0.46, compared to RMB 0.13 in the first half of 2023[118] - The company's comprehensive income for the first half of 2024 was RMB 490.860 million, compared to RMB 123.919 million in the same period of 2023[119] - Total comprehensive income for the first half of 2024 was RMB 513,552 thousand, a significant improvement from RMB 123,919 thousand in the same period of 2023[122] - Reported profit attributable to the company's owners for the first half of 2024 was RMB 537,028 thousand, up from RMB 150,304 thousand in 2023[199] - Adjusted recurring basic earnings per share for the first half of 2024 were RMB 0.45, up from RMB 0.13 in 2023[199] Business Segments Performance - Acoustic business revenue for the first half of 2024 was RMB 3.46 billion, a year-on-year increase of 4.1%, with a gross margin of 29.9%, up 4.4 percentage points[9] - SLS master-level speaker shipments exceeded 12 million units, a year-on-year increase of nearly 200%[9] - PSS-related business contributed revenue of RMB 1.52 billion with a gross margin of 25.0%[10] - Optical business revenue for the first half of 2024 was RMB 2.21 billion, a year-on-year increase of 24.9%, with a gross margin improvement to 4.7%, up 21.7 percentage points[11] - 1G6P glass-plastic hybrid lens shipments reached approximately 1.4 million units, a year-on-year increase of nearly 40%[11] - Electromagnetic transmission and precision components business revenue for the first half of 2024 was RMB 3.66 billion, a year-on-year increase of 1.1%, with a gross margin of 22.9%, up 3.6 percentage points[12] - Hinge product shipments reached nearly 500,000 units in the first half of 2024[14] - Heat dissipation product revenue increased by nearly 100% year-on-year to RMB 150 million in the first half of 2024[14] - Sensor and semiconductor business revenue decreased by 21.2% YoY to RMB 389 million in H1 2024, with gross margin improving by 5.1 percentage points to 16.4% due to higher-margin product mix[15] - The company shipped over 7 billion MEMS microphones globally, with high-value Android product shipments increasing by 15 percentage points to over 60% in H1 2024[15] - Revenue from the PSS - Automotive and Consumer Acoustic Products segment was RMB 1,522,050,000 for the six months ended June 30, 2024, compared to RMB 10,617,000 for the same period in 2023[131] - Revenue from the Greater China region (including Mainland China, Hong Kong, and Taiwan) was RMB 6,133,618,000 for the six months ended June 30, 2024, compared to RMB 4,509,060,000 for the same period in 2023[133] - Revenue from the Americas region was RMB 3,786,478,000 for the six months ended June 30, 2024, compared to RMB 4,139,844,000 for the same period in 2023[133] - Revenue from other Asian countries was RMB 729,847,000 for the six months ended June 30, 2024, compared to RMB 553,975,000 for the same period in 2023[133] - Revenue from Europe was RMB 572,152,000 for the six months ended June 30, 2024, compared to RMB 16,065,000 for the same period in 2023[133] R&D and Innovation - R&D expenses as a percentage of revenue increased by 1.1 percentage points to 8.4%[7] - R&D expenses increased by 40.6% YoY to RMB 949 million in H1 2024, driven by new project investments and PSS-related R&D[23] - R&D costs for the first half of 2024 were RMB 949.398 million, a 41% increase from RMB 675.179 million in the same period of 2023[118] - The company has allocated a significant portion of its annual budget to R&D investments to build a sustainable technology roadmap and intellectual property portfolio, prioritizing data security[43] - The company is committed to developing patented innovative technologies and integrating global R&D with its diversified manufacturing base to provide optimal solutions and reduce adverse business impacts from trade friction[48] Capital Expenditures and Investments - Capital expenditures rose by 48.8% to RMB 916,891 thousand in the first half of 2024[7] - Free cash flow reached RMB 1,930,813 thousand in the first half of 2024[7] - Net cash used in investing activities for the first half of 2024 was RMB 2,444.0 million, a significant increase from RMB 504.2 million in the same period of 2023, primarily due to the acquisition of subsidiaries (RMB 1,472.8 million) and capital expenditures (RMB 936.9 million)[31] - Capital expenditures in the first half of 2024 totaled RMB 916.8 million, up from RMB 616.1 million in the same period of 2023, focusing on sustainable capital expenditure plans to capture new market opportunities and support long-term business strategies[32] - Net cash inflow from financing activities in the first half of 2024 was RMB 729.8 million, driven by bank loan proceeds of RMB 2,260.1 million, partially offset by repayments of bank loans (RMB 1,126.7 million) and interest payments (RMB 179.8 million)[33] - The company made additional investments of USD 694,000 (approximately RMB 4,934,000) and GBP 355,000 (approximately RMB 3,234,000) into private equity funds during the six months ended June 30, 2024[153] - The company repurchased 60,176,387 and 35,102,892 shares of optical shares, representing approximately 0.8890% and 0.5186% of the total optical shares, for RMB 149 million and RMB 87 million respectively[96] - The company repurchased approximately 1.408% of Chenrui Optics shares for a total consideration of RMB 235,700,000[198] Sustainability and ESG Initiatives - The company has been a member of the FTSE4Good Index since 2020 and maintains an A rating in the MSCI ESG Ratings[113] - The company has been rated as "low ESG risk" by Sustainalytics since 2020[113] - The company has been purchasing green power certificates in China to support its commitment to sustainable energy[112] - The company's annual solar power generation capacity exceeded 18 million kWh as of June 30, 2024[112] - The company has formed a Sustainability Committee and implemented a comprehensive climate change policy, integrating climate-related issues into its sustainability management system, including ISO environmental and energy management standards[45] - Established a dedicated Sustainability Committee in 2024 to drive ESG initiatives[106] - Conducted a comprehensive climate risk assessment with third-party ESG consultants in 2024[106] - The Board of Directors will evaluate the company's sustainability standards, priorities, and goals, and refine the company's strategies, policies, and practices in environmental, social, and governance (ESG) aspects[59] - The Board of Directors will consider and approve the company's annual sustainability report[59] - The Sustainability Committee was established in May 2024 to oversee environmental, social, and governance (ESG) initiatives, climate risks, and opportunities, ensuring sustainable operations[71] - The Sustainability Committee evaluates emerging sustainability issues, assesses stakeholder impacts, and manages climate and environmental risks[71] Corporate Governance and Board Activities - The company's Board of Directors is responsible for overseeing the overall operations, including business performance, risk management, and internal control system effectiveness[52] - The Board of Directors approves major investments and financing activities on a quarterly basis, evaluating management implementation progress and supervising business operations to align with plans and budgets[57] - The Board of Directors approves the company's annual budget, interim and annual financial statements, and recommends the reappointment of external auditors[58] - The company's corporate governance framework includes high standards of disclosure and excellent corporate governance, with a focus on continuous adaptation and improvement[50] - The company's core values include customer experience, talent excellence, innovation, agility, and professionalism, integrated into various measures and tools such as employee engagement and retention[52] - The company's Board of Directors is composed of independent non-executive directors and executive directors, with no changes in the composition during the first half of 2024[53][55] - The company's Board of Directors reviews and approves annual operating and capital budgets, and approves additional items/amounts beyond the approved budget when necessary[52] - The company's Board of Directors ensures that the corporate culture is deeply embedded in operational management, workplace policies, and stakeholder relationships[52] - The company's Board of Directors is committed to high standards of corporate governance, including transparency, accountability, and independence[50] - The company's Board of Directors evaluates the effectiveness of the Board and its committees annually, ensuring sufficient resources are provided for their duties[58] - The Audit and Risk Committee reviewed the unaudited condensed consolidated financial statements for the first half of 2024 and agreed with the accounting treatments adopted in preparing the condensed consolidated financial statements[64] - The company has adopted a Board Diversity Policy, aiming for gender parity in both the Board and senior management leadership[65] - The Board consists of one female director and five male directors, with the senior management team including one female and two males[66] - The company has adopted a formal, transparent nomination policy to identify and nominate director candidates, ensuring their qualifications align with the company's business needs[69] - The Nomination Committee reviews the composition, structure, and diversity of the Board, ensuring transparent procedures for director appointments and re-appointments[68] - The Remuneration Committee is responsible for recommending overall compensation policies and structures for executive directors and senior management[70] Employee and Talent Management - The company's total number of full-time employees increased by 23.1% to 36,833 as of June 30, 2024, compared to 29,922 on December 31, 2023, with 60% of the increase attributed to the acquisition of PSS[72] - The company's human capital efficiency continues to improve through advanced production methods and automation processes[72] - The company's 2016 Share Award Plan, effective for 10 years from March 23, 2016, aims to incentivize selected employees and attract talent for further development[73] - The company participates in mandatory pension and social insurance programs for employees in multiple countries, including new regions due to the PSS acquisition[72] - The company's employee compensation is determined based on individual performance, professional qualifications, industry experience, and market trends[72] - The maximum number of shares that can be awarded under the 2016 Share Award Scheme is limited to 1.65% of the company's issued share capital, which amounts to 19,775,250 shares as of August 22, 2024[74] - No new shares were issued to the 2016 Scheme Trustee for the 2016 Share Award Scheme from the adoption date until June 30, 2024[74] - A total of 10,230,593 shares were awarded to 340 employees under the 2016 Share Award Scheme, with 2,722,799 shares and 2,627,518 shares vested on March 24, 2023, and March 24, 2024, respectively[74] - As of June 30, 2024, the 2016 Scheme Trustee held a total of 14,752,257 unvested shares, with 11,698,367 shares remaining available for further awards under the 2016 Share Award Scheme[75] - The performance targets for the 2016 Share Award Scheme include organizational-level financial performance indicators and individual-level performance assessments[78] - The company has set a minimum annual revenue target of RMB 30 billion and a pre-tax profit margin requirement for the 2016 Share Award Scheme, although these conditions have been waived by the board[78] - The fair value of shares awarded under the 2016 Share Award Scheme is determined based on the market value (closing price) of the shares on the grant date[78] - The 2023 Share Award Plan allows for a maximum of 45,000,000 shares to be awarded, representing approximately 3.75% of the company's issued share capital as of August 22, 2024[79] - The 2023 Share Award Plan permits a maximum of 0.5% of the company's issued share capital (5,992,500 shares as of August 22, 2024) to be awarded to any single selected employee[79] - As of June 30, 2024, the 2023 Plan Trustee held a total of 11,819,000 shares for the 2023 Share Award Plan[80] - No shares have been awarded to selected employees under the 2023 Share Award Plan since its adoption until June 30, 2024[80] - The company's subsidiary, Chenrui Optics, has a subsidiary equity incentive plan aimed at attracting top talent and rewarding contributions to business development[82] - The subsidiary equity incentive plan granted eligible employees the right to subscribe to approximately 2.0% of the enlarged share capital of Chenrui Optics, totaling 135,377,918 shares at a price of RMB 1 per share, amounting to RMB 135,377,918[171] - As of June 30, 2024, the company repurchased 21,984,364 restricted shares from eligible participants at RMB 1 per share, with no shares granted during the period[171] - The company repurchased 1,866,630 vested shares for RMB 1,867,000, recorded as other payables as of June 30, 2024[171] - The fair value of restricted shares not yet exercised as of June 30, 2024, was RMB 40,520,000, based on transaction prices[173] - The company allocated RMB 27,215,000 for share-based payment expenses related to the subsidiary equity incentive plan for the six months ended June 30, 2024[174] Acquisitions and Strategic Moves - The company aims to diversify into smart cars, AR/VR, industrial, and semiconductor sectors[5] - The company is diversifying its revenue streams by expanding into the automotive market, including a major acquisition, to reduce reliance on the smartphone market[39] - PSS acquisition constitutes a major transaction under Chapter 14 of the Hong Kong Listing Rules, with the first batch completed on February 9, 2024, making the target company an 80% indirect subsidiary of the company[94] - The second batch of the PSS acquisition is expected to be completed by mid-2025, or mid-2026/mid-2027 if extended[94] - The PSS acquisition is a strategic move to accelerate the company's diversification in the automotive industry and enhance its audio solutions portfolio[94] - The company completed the first batch acquisition of 80% of the issued shares of PSS Group, a company specializing in automotive acoustic components and sound systems, on February 9, 2024, as part of a strategic move to diversify and enhance its acoustic solutions portfolio[125] - The acquisition of PSS Group positively impacted the company's revenue and profitability during the interim period[125] - The company completed the first tranche of the acquisition of PSS Group on February 9, 2024, with a cash consideration of RMB 1,924,223,000[176] - The total consideration for the first tranche of the PSS Group acquisition, including deferred consideration, was RMB 3,445,370,000[177] - The first batch of the transaction was priced at $320 million (equivalent to RMB 2.273 billion), with an interest of $18.641 million (equivalent to RMB 132.424 million) calculated at an annual rate of 6.75% from April 1, 2023, to February 9, 2024, and a price adjustment loss of $27.773 million (equivalent to RMB 197.297 million)[178] - The second batch of the transaction could be

Investment Rating - The report upgrades the investment rating of AAC Technologies from NEUTRAL to BUY with a target price of HK$ 37.24, representing an upside of 19.2% from the current price of HK$ 31.25 [1]. Core Insights - AAC Technologies reported a net profit of RMB 537 million for 1H24, a significant increase of 257% year-on-year, driven by a recovery in gross margin across all segments [1][2]. - The company achieved a blended gross margin of 20% for the first time since 1H21, with expectations of continued growth in automotive-related business and optics segments [1][2]. - Management expressed a more optimistic outlook for business segments compared to FY23, indicating a clearer vision for mid-term growth [1][2]. Revenue Breakdown - **Acoustics Segment**: Contributed approximately 31% of 1H24 revenue, with sales rising 4.1% year-on-year to RMB 3,466 million and gross margin increasing to 29.9% [1][2]. - **Haptics and Precision Mechanics**: Accounted for around 33% of 1H24 revenue, with a revenue growth of 1.1% year-on-year to RMB 3,660 million and gross margin rising to 22.9% [2]. - **Optics Segment**: Represented about 20% of 1H24 revenue, with a 25% year-on-year increase in revenue to RMB 2,210 million and a gross margin improvement to 4.7% [4][5]. Future Projections - The report anticipates a compound annual growth rate (CAGR) of 10.5% for sales and 17.0% for net profit from FY24E to FY26E, supported by higher sales forecasts and improved gross margins [5][6]. - Management expects optics segment revenue to grow by 20% and shipment by 40% in FY24E, indicating a positive trend in product demand and pricing [5][6]. Strategic Positioning - AAC Technologies is positioned to benefit from the automotive acoustics market through its acquisition of PSS, which has a market share of 15-20% in the global automotive speaker market [1][2]. - The company is leveraging its expertise in acoustic solutions to meet the growing demand for intelligent cockpit systems in vehicles, indicating a strategic expansion into new market niches [1][2].