Net profit due to 2024H1 increased by +75 to 105% year on year, withheld from non-return mother increased by +77 to 106% year on year, and performance exceeded expectations. The company released the 2024H1 performance forecast. 24H1 is expected to achieve net profit of 1.58 to 0.185 billion yuan, +75 to 105% year-on-year, and achieve deduction of non-net profit of 1.50 to 0.175 billion yuan, or +77 to 106% year-on-year. According to the median estimate, 24H1 net profit was 0.172 billion yuan, +91% YoY, net profit 0.163 billion yuan, +91% YoY; of these, 24Q2 net profit to mother was 0.114 billion yuan, YoY +60%, +96% month-on-month, after deducting non-net profit 0.111 billion yuan, +63% YoY, and +113% month-on-month. The performance exceeded market expectations.

We expect the Q2 shipping pace for step-up products to be normal, and the rise in commodity prices will have little impact on the company's transformer profits. We expect the company's Q2 revenue to maintain a relatively rapid growth rate, mainly due to the contribution of PV boosting and distribution products. 1) We expect the Q2 shipping pace for the company's major domestic customers to meet expectations. At the same time, the scale effect+digital factory quality and efficiency improvement will basically hedge the impact of price increases in bulk products on transformer gross margin. 2) Overseas European and American direct sales customers are starting up. Currently, European customers are progressing faster. The US factory in North America has accelerated its layout, the US factory will be put into operation as soon as 24Q4, and the Mexican factory is in the process of construction. We believe that the impact of trade risks (such as tariffs) on the company's profits is largely manageable. 3) Looking ahead to the whole year, we expect revenue from PV boosting & conversion products to maintain rapid growth. In terms of production capacity, in terms of production capacity, the Anhui base was put into operation in 24Q2, and overseas production capacity investment is also accelerating, ensuring a high increase in transformer orders and revenue.

Profit forecast and investment rating: Considering the rapid development of the company's overseas business and the improvement in the quality and efficiency of the automated production line exceeded expectations, we raised the company's net profit from 2024-2026 to 0.401/0.556/0.704 billion yuan (previous value was 0.35/0.49/0.64 billion yuan), +91%/+39%/+27% year-on-year, corresponding to current PE prices at 18x, 13x, and 10x, maintaining the “buy” rating.

Risk warning: Renewable energy installations fall short of expectations, overseas market expansion falls short of expectations, risk of exchange rate fluctuations, and increased competition