Forecast 1H24 revenue +16.3% YoY, net profit to mother +26.6% YoY. The company released a 1H24 performance report. It is expected that 1H24 will achieve revenue of 6.17 billion yuan, +16.3% YoY, and net profit of 0.89 billion yuan, +26.6% YoY; operating margin 17.1%, +1.4ppt, net profit margin 14.4%, YoY +1.2ppt. We calculated that 2Q24 achieved revenue of 3.51 billion yuan, +12.1% YoY, +32.0% month-on-month, net profit to mother 0.52 billion yuan, +8.7% YoY, and +44.2% month-on-month.
The company's equity incentive amortization expenses in 2024 are about 0.11 billion yuan. We estimate that 1H24 confirms about 55.5 million yuan (vs. 1H23 is 0 yuan). If added back, the corresponding 1H24 net profit is 0.94 billion yuan, +34.6% year over year, and 2Q24 net profit 0.55 billion yuan, +14.4% year over year. We believe that the company's 1H24 performance report is basically in line with our expectations and that of the market.
Key points of interest
The abundance of orders is expected to support a gradual acceleration in revenue. 1H24 revenue was +16.3% year-on-year, and the growth rate was slightly below the annual growth target of 20%. We believe that it is mainly due to some project delivery pace issues. Considering that the company has plenty of orders on hand (16.513 billion yuan of new orders without tax in 2023, +36.22% year over year) and the company's average order delivery time of about 1 year, revenue growth is expected to gradually accelerate in the second half of the year.
Domestic demand is steady+overseas growth is high, and the target for new orders is expected to be achieved steadily. The company plans to achieve an additional contract order of 20.6 billion yuan (excluding tax) in 2024, +25% over the same period last year, demonstrating confidence in growth. Looking ahead, demand for power equipment at home and abroad continues to be booming, and company orders are expected to maintain steady growth. 1) Within the network: The total amount of tenders for 1-3 batches of power transformation equipment from the State Grid was +8% compared to the same period. We believe that the construction of the main network driven by new energy consumption and power insurance will maintain its prosperity. The company's main products maintained a stable share in the State Grid. In 1-3 batches of substation equipment tenders, the company's 110kV GIS product share was 9.4%, ranking third, and 220kV GIS products ranked fourth with a 10.5% share. 2) Off-grid: The installed capacity of photovoltaic/wind power in January-May was +52.2%/20.5%, respectively. 3) Overseas: At the macro level, many overseas power grid investors and operators, such as National Grid and Exelon, raised Capex plans to actively promote grid upgrades and expansion. At the same time, electricity supply was tight and power outages were frequent in the first half of the year; at the meso level, China's power equipment export scale grew steadily. According to data from the General Administration of Customs, the export value of major power equipment in January-May was +15.2%, of which transformers/high voltage switches were +23.1%/13.4%. We are optimistic about this major global new power system construction cycle. Chinese manufacturers are facing the opportunity to take on the spillover of orders. As a leading company with an extensive overseas channel layout and diversified product development, Siyuan's overseas business growth will continue and grow more than expected.
Profit forecasting and valuation
We keep our 2024/2025 net profit forecast of 2.06/2.55 billion yuan unchanged, and the current stock price corresponds to 24x/19x 2024/2025e P/E. Maintaining an outperforming industry rating and a target price of 76.0 yuan, corresponding to 29x/23x 2024/2025e P/E, the current stock price still has 19.6% room to rise.
risks
Grid investment fell short of expectations, raw material prices rose, and overseas business expansion fell short of expectations.