Strong Revenue Growth for Intron With Some of this Ploughed Back Into Increasing R&D; FVE to HKD 4.26

Intron Technology reported first-half revenue up 53% to CNY 1,321 million with net profit up 20% to CNY 95 million. Revenue growth was driven by new energy vehicle solutions, which reported 179% growth. Intron has been able to secure good semiconductor supply during a time of industry shortage, which has helped it gain market share and improve relationships with existing customers. This was done using its strong relationship with chip supplier, Infineon, where Intron is Infineon’s largest regional customer. Revenue growth is on the back of 201% growth in new energy vehicle unit sales in China during first-half 2021 with overall car sales up 25.60%, and these growth rates benefitting from the weak first-quarter 2020 due to coronavirus. Sales of new energy vehicles in China in July were up 164% with overall car sales down 12%. Intron is mainly exposed to local brands, which have gained market share in 2021 so the market conditions for Intron were even better. The government has set a target for electric vehicles, or EVs, to account for 20% of Chinese auto sales by 2025, up from 5.40% in 2020 and forecasts 5.30 million EVs to be sold in 2025, implying a five-year CAGR of 31%. Profit growth was weaker than revenue growth due to a 68% increase in research and development, or R&D, spending to CNY 97.30 million, with other administrative expenses increasing only 27%. We see the higher R&D expense as positive for the company’s potential future growth.