Event: The company issued a 2024H1 performance advance announcement.

The basic orientation is good, and the company's performance has grown beyond expectations

The company expects 2024H1 to achieve net profit of 0.459-0.516 billion yuan, a year-on-year increase of 60%-80% over the same period of the previous year; net profit without deduction of 0.383-0.437 billion yuan, an increase of 180%-220% over the previous year. The sales scale of the company's diesel engine segment continued to expand in the first half of 2024. Orders increased dramatically, and the order price and gross margin of the main product, marine low-speed engines, also increased, and sales volume of high-margin models increased year-on-year.

As the core component of ships, marine engines have fully benefited from the increase in the volume and price of new shipbuilding orders: by the end of 2024H1, the Clarkson New Shipbuilding Price Index closed at 187.2 points, an increase of 5% during the year, up about 50% from the beginning of the current cycle. Marine engines account for about 20% of the total ship's value. Prices increase as ship prices rise in this cycle, and engine prices are more flexible than the entire ship.

In terms of order volume: In 2024, H1 global new shipbuilding orders and deliveries will remain active, and China is still in a leading position in the three major shipbuilding indicators. In terms of CGT, China accounts for 64% of new 24H1 global orders and 53% of delivery orders. The company's domestic share of low-speed marine diesel engines has reached 78% in 2023. It is a well-deserved domestic marine engine leader, and the number of orders received is expected to continue to grow.

Driven by dual-fuel demand, the company opens a long-term upward channel

Dual fuel ship replacement is one of the most effective means for shipowners to respond to IMO emission reduction requirements. According to Clarkson statistics, 41% of the world's new shipbuilders in the first half of the year were dual-fuel/dual-fuel reserved ships, including 109 LNG dual-fuel ships, 49 methanol dual-fuel ships, 15 liquid ammonia dual-fuel ships, 42 liquefied petroleum gas ships, and 4 hydrogen ships. As of June 24, dual-fuel vessels accounted for 7% of the global fleet capacity. It is expected that this ratio will rise to 25% by the end of this century, and the alternative market for dual-fuel ships will open up for a long time. According to the company's official WeChat account, the first domestic methanol dual-fuel low-speed engine has been successfully tested by CSSC engines. Currently, the company has ordered more than 40 methanol mainframes of various models. At the same time, construction of the company's ammonia fuel engine test platform began at the beginning of this year, and it is expected that the first domestic ammonia fuel engine will be delivered in 2025. Relying on strong market advantages and R&D advantages, the company is expected to open up a long-term upward channel.

Profit forecast: As the only marine power listing platform under China Shipbuilding Group, the company is expected to fully benefit from the upward trend in the marine industry over a large cycle. As high-value orders continue to be delivered, the company's profits will further increase. We forecast the company's 2024-2026 revenue of 55.058/66.332/79.679 billion yuan, net profit to mother of 1.408/2.29/3.097 billion yuan, corresponding PE of 32.9/20.23/14.96X, giving it a “recommended” rating.

Risk warning: macroeconomic fluctuation risk, raw material price fluctuation risk, exchange rate fluctuation risk