Revenue for the first half of 2024 increased 10.93% year over year, and net profit to mother increased 21.74% year over year. In the first half of 2024, the company achieved revenue of 0.797 billion yuan, up 10.93% year on year; gross profit margin of 38.49%, up 5.64 pct year on year; net profit to mother 0.127 billion yuan, up 21.74% year on year. We believe that the net profit growth rate of the company is higher than the revenue growth rate, mainly due to the impact of the business structure (revenue of PLC products with high gross margin increased 26.67% year on year), gross margin increased by 5.64 pct year on year, etc.

The rate increased by 2.21pct year-on-year during the first half of 2024. In the first half of 2024, the company's rate for the period was 23.88%, an increase of 2.21pct year-on-year. Sales rates, R&D rates, management rates, and financial rates have all increased to varying degrees.

Let's take a look specifically:

(1) The sales rate was 9.75%, up 1.28pct year on year. (2) The management fee rate was 4.77%, an increase of 0.18pct over the previous year.

(3) The R&D rate was 9.59%, an increase of 0.67pct over the previous year. (4) The financial rate was -0.23%, an increase of 0.09pct over the previous year.

Revenue for the second quarter of 2024 increased 17.29% year over year, and net profit to mother increased 30.27% year over year. In the second quarter of 2024, the company achieved revenue of 0.457 billion yuan, up 17.29% year on year; comprehensive gross profit margin of 38.14%, up 4.06 pct year on year; net profit to mother 0.082 billion yuan, up 30.27% year on year. We believe that the growth rate of the company's net profit to mother is higher than the revenue growth rate, mainly due to the 4.06 pct year-on-year increase in gross margin, etc.

The rate increased by 3 pct year-on-year during the second quarter of 2024. In the second quarter of 2024, the company's rate for the period was 22.60%, an increase of 3 pct over the same period last year. R&D rates, sales rates, management rates, and financial rates have all increased to varying degrees.

Let's take a look specifically:

(1) The sales rate was 9.40%, up 1.62 pct year on year. (2) The management fee rate was 4.41%, an increase of 0.08pct over the previous year.

(3) The R&D rate was 8.94%, an increase of 0.95pct over the previous year. (4) The financial rate was -0.14%, an increase of 0.36pct over the previous year.

Build an integrated solution provider, and traditional industries and emerging industries develop together. Relying on major customer strategies and industry project systems, the company has a deeper grasp of processes and processes in different industries, launched dozens of industry solutions for nine major industries, and further stabilized its advantages in traditional fields. Looking at business segments, the first half of 2024:

(1) PLC: Revenue of 0.312 billion yuan, a year-on-year increase of 26.67%, gross profit margin of 56.71%. In the first half of the year, the company developed the XSF series blade PLC to further improve the XF series distributed I/O system, covering all advanced manufacturing fields and traditional fields, and supporting various system configurations and rich IO models.

Relying on its own advantages in the small PLC market, the company further extends its product line to medium-sized PLCs and other industrial control products closely related to PLCs, helping to stabilize its dominant position in traditional industries and accelerate the expansion of industries such as new energy and high-end intelligent manufacturing.

(2) Driven products: revenue 0.365 billion yuan, gross profit margin 24.30%. The company has now formed three categories, including small-size servo systems, PROFINET bus servo systems, and low-voltage servo systems, and 8 sub-series servo system products, including bus type and pulse type, to fully cover the different needs of traditional downstream industries and emerging industries.

(3) Human-machine interface: Revenue of 0.093 billion yuan, up 1.56% year on year, gross profit margin of 32.95%.

(4) Smart devices: revenue 0.021 billion yuan, gross profit margin 38.08%. The company has SCARA robots, six-axis robots and corresponding robot control systems, which are used in welding, handling and palletizing fields.

Profit forecasting and investment advice. We expect the company's net profit for 2024-2026 to be 0.247 billion yuan, 0.309 billion yuan, and 0.39 billion yuan, corresponding to EPS of 1.76 yuan, 2.20 yuan, and 2.78 yuan, respectively. Referring to comparable company valuations, the company was given a 2024 PE25-30X, with a reasonable price range of 44 yuan - 52.8 yuan, maintaining a “superior to the market” rating.

Risk warning. (1) Demand in the industrial control industry falls short of expectations due to economic fluctuations; (2) Fierce market competition has led to a decline in product profitability.