1H2024 earnings forecast is in line with our expectations

The company released 1H2024 performance forecast: estimated revenue of 94.7 million yuan (a slight increase of 2.22% year on year) and net profit of 12.4 million yuan (+18.16% year over year). We calculate the 1H2024 net profit margin of 13.1%, after deducting the non-net profit margin of 1.4%. Based on the company's changes since 2Q24, our interpretation is as follows:

1H24 There was a restorative increase in new orders. 1) According to the company's response to the inquiry letter on 5/27, new 2024M4 orders increased 177% year-on-year, mainly due to tenders for nuclear industry projects. 2) The company developed in multiple fields and echelons. The number of product projects increased from 48 at the end of 2022 to 65 at the end of 2023. In 2024, a product matrix centered on equipment for specific scenarios, integrated system solutions, and explosion-proof AGVs was formed.

Breakthroughs have been made in nuclear waste storage technology. CNNC publicly announced on 7/25 that “the two-step φ650mm cold crucible glass curing engineering prototype independently developed by the China Institute of Atomic Energy Research, a subsidiary of CNNC, successfully completed 90 days of continuous operation tests”, indicating that China's cold crucible glass curing technology has the conditions for engineering application. As one of the co-participants, Jingye Intelligence provides technical support for the treatment of high-emission waste.

1H2024 has improved profitability. The net profit margin of 1H2024 is expected to be 13.1%, up 1.8 pcts from the same period in 2023 (11.3%). The company is stepping up efforts to increase efficiency and reduce costs. In 2024, with guaranteed delivery, cost control will be strengthened.

Key points of interest

A number of new businesses have been developed, and the growth of special giants has accelerated. According to the company's exchange in July, the second phase of the spent fuel post-processing project was successfully delivered, and the third phase of the demonstration plant project and the large factory research project received significant order growth; orders increased slightly; the nuclear fuel component manufacturing and other special aspects increased slightly; the nuclear power sector is the company's key expansion area, and the company has invested in R&D of related products and intelligent equipment, and the business continues to expand. We are optimistic about the flexibility of performance growth in the next 2-3 years.

Profit forecasting and valuation

We kept our 2024/2025 profit forecast unchanged. Considering the decline in the valuation of the mechanical automation sector, the target price was lowered by 18.9% to 34.71 yuan, corresponding to the 2024/2025 P/E of 40x/21x. The current price corresponds to the 2024/2025 P/E of 31.5x/16.7x, corresponding to 27% room for increase, maintaining the industry rating.

risks

Delivery confirmation volatility, scientific research prototype certainty, etc.