Q2 Revenue achieved relatively rapid growth, and profit growth performance was impressive

The company disclosed a quick performance report. In the first half of '24, it achieved revenue of 1.798 billion yuan, +33.56% year on year, net profit to mother was 0.129 billion yuan, up 47.45% year on year, after deducting non-net profit of 0.122 billion, +45.89% year on year, net interest rate to mother was 7.16%, up 1.24 pct year on year; of these, Q2 achieved revenue of 1.14 billion yuan in a single quarter, +48.04% year on year, net profit to mother was 0.09 billion yuan, up year on year 68.78%, after deducting non-net profit of 0.09 billion, a year-on-year increase of 60.82%. The net profit margin for the Q2 quarter was 7.88%, up 0.97pct year-on-year.

It won a major contract of 1.095 billion yuan, with sufficient orders in hand to support performance growth. The company recently won the bid for North Huajin United Petrochemical Co., Ltd.'s fine chemical and raw materials engineering project with a discount of 0.2 million million tons/year for the hydrogen peroxide plant design, procurement and construction engineering (B+EPC) project, with a total order of 1.095 billion yuan. The company is responsible for engineering design, procurement and construction, with a construction period of 960 days. In January '24, the company signed 2 contracts with Zhejiang Tuoen Optical New Materials Co., Ltd., with a total contract amount of 0.65 billion yuan (tax included), accounting for 20.05% of the 23 year revenue; of these, the 7,000 tons/year general contract price is 0.3 billion yuan (tax included) for the general contracting of the 7,000 tons/year project, with a provisional contract price of 0.35 billion yuan (tax included) for the construction of the 41,000 tons/year optical resin project. This is the first time that the company has applied modular construction methods to a high-end optical new material project, which helps the company accumulate modular construction experience in this field.

Issuing convertible bonds to raise capital. The proposed expansion base is expected to increase the module manufacturing capacity. The company plans to issue convertible bonds to raise 0.75 billion yuan for the Nantong Libert Heavy Industry Project (total investment of 1.295 billion yuan). The project is adjacent to the Yangtze River. The production base covers an area of about 47,000 square meters. The main manufacturing and manufacturing of large-scale modules used in nuclear power engineering, petrochemicals, pharmaceutical electronics, marine engineering, mining machinery and other industries. After completion, it may enhance the company's ability to simultaneously develop multiple modules and further enhance the company's industrial module design and manufacturing manufacturing and assembly capabilities.

Optimistic about the company's medium- to long-term growth potential and maintain a “buy” rating

The company has always focused on the design and manufacture of industrial modules, giving full play to the company's “design-procurement-modular-construction” (EPFC) industry chain and integrated service capabilities. According to the “Three-Year Shareholder Return Plan (2023-2025)” issued by the company, the company's cash dividend for the last three years is not less than 30% of the annual profit if the conditions are met. We expect the company to achieve net profit of 0.24, 0.31, and 0.38 billion in 24-26. We approve giving the company 20 times PE in 24 years, with a corresponding target price of 10.71 yuan, maintaining a “buy” rating.

Risk warning: Raw material procurement prices have risen; SOOC product sales have fallen short of expectations; market expansion falls short of expectations; management risks brought about by the expansion of business scale; quick performance reports are only preliminary accounting results, please refer to the company's official financial report.