The company released its 2024 semi-annual performance forecast, corresponding to the outstanding performance of 24Q2. Judging from the company's 2024 semi-annual performance forecast, the company 24H1 is expected to achieve net profit of 68-85 million yuan, yoy +86.65%-133.31%; it is expected to deduct non-net profit of 52-67.5 million yuan, yoy +105.42%-166.64%.

Net profit due to mother is expected to be 57.15-74.15 million yuan corresponding to 24Q2, yoy +264.05-372.35%; the estimated deduction is not 44.91-60.41 million yuan, yoy +579.60-814.13%.

We believe that the reasons for the company's rapid increase in net profit include:

1. Domestic: There are sufficient orders related to UHV. It is expected that most of the orders in 23 will be executed by the company in 2023, and will enter an intensive order delivery and carry-over period in 2024. Among them, the delivery of 24Q2 UHV products has led to an increase in revenue and an increase in the share of high-margin products, effectively increasing the company's overall gross profit margin (gross margin of UHV products is about 35%-40%, and the gross margin of ultra-high voltage and high pressure products is about 25%-30%).

As of July 1, 2024, the company has obtained a total of about 0.14 billion yuan of orders from the State Grid centralized bidding and procurement. According to the “Notice on Accomplishing the Work of New Energy Consumption to Ensure the High-Quality Development of New Energy Sources” issued by the National Energy Administration, 5 new UHV lines will be started in China in 2024. As a pioneer in the field of suspended porcelain insulators, the company won about 50% of the UHV insulator market in the past in the State Grid UHV centralized bidding. It is expected to continue to benefit from UHV construction, revenue, and profit growth.

2. Overseas: Breakthroughs have been made in market development. In the first half of '24, orders exceeded 0.35 billion yuan. In 2024, the company made a breakthrough in overseas market expansion, and 24H1 overseas orders exceeded 0.35 billion yuan. Among them, Vietnam and Pakistan received a total of 0.1 and 0.11 billion yuan of orders respectively.

Looking ahead, the company is actively exploring emerging markets such as Saudi Arabia, Vietnam, and Indonesia, as well as the European market, and has made good progress. It is expected that it will continue to benefit from increased demand in overseas markets in the future. The company has now obtained Saudi entry qualifications and Australia's Essential Energy Power Company supply qualification, and has become an OEM supplier for the Italian National Electric Power Company ENEL global procurement in the field of composite insulators. It has signed a three-year 70 million yuan framework contract with ENEL, and is currently undergoing market entry certification in Eastern European countries such as the Czech Republic and Hungary.

Profit forecasting

We continue to be optimistic about the company's performance growth capacity and sustainability in domestic and overseas markets. At the same time, the gradual release of production capacity at the company's Jiangxi plant will also protect the company's demand in the overseas order market.

Based on the company's 24H1 performance forecast and operating conditions, we adjusted the company's 24-26 revenue to 1.408, 1.985, 2.382 billion yuan (the original value was 1.705 and 2.015 billion yuan in 24-25 years); net profit to mother of 1.72, 2.58, 0.336 billion yuan (the original value was 2.90 and 0.381 billion yuan in 24-25 years), yoy +229.14%/+49.59%/+30.50%, Corresponds to current valuations of 20, 13, and 10X PE, maintaining a “buy” rating.

Risk warning: The performance forecast is the result of preliminary calculations by the company's financial department. The specific financial data is based on the 2024 semi-annual report disclosed by the company; UHV industry policy risk; market change risk; new production capacity absorption risk; raw material price fluctuation risk.