Event: The company announces semi-annual results for 2024. In the first half of 2024, the company achieved operating income of 0.41 billion yuan, +14.93% year-on-year; net profit attributable to mothers/net profit without return to mother was 0.072/0.071 billion yuan, +15.35%/+19.52%, respectively.

2024Q2's revenue grew steadily, and profitability recovered significantly. On a quarterly basis, 2024Q2 achieved operating income of 0.24 billion yuan, +16.17% year over year; net profit attributable to mothers/net profit without return to mother of 0.055/0.054 billion yuan, respectively, and +43.10%/+48.26% year-on-year. 2024Q2 achieved gross profit margin of 46.39%, +1.93pct year on year, +9.15pct month-on-month, achieved net profit margin of 22.79% to mother, +4.29pct year-on-year, and +12.69pct month-on-month. The company's profitability improved significantly this quarter. We believe that the main factors are: 1) 24Q2 orders were repaired smoothly, and the scale effect was better, and price transmission was ideal after the May price increase, resulting in a significant month-on-month restoration of gross margin; 2) The company actively controlled fees and increased efficiency, compounded the reduction in collective share payment expenses in the current period. 2024Q2 sales expense ratio/management expense ratio/R&D expense ratio were -1.00pct/-1.42pct, respectively.

Accelerate the development of overseas markets, and continue to expand the scale of business. In recent years, the company has continued to accelerate the pace of “going global” and increasing its overseas expansion efforts. By increasing the size of the foreign trade business team, actively participating in large-scale overseas high-end equipment manufacturing exhibitions, continuing to broaden market channels, and growing overseas revenue rapidly, the company achieved overseas revenue of 0.047 billion yuan, +60.90% year over year; 2024H1 achieved overseas revenue of 23.0469 million yuan, or +43.11% year-on-year. The profitability of the company's overseas business is significantly higher than that of domestic business. The gross margin of the company's overseas business was 53.96% in 2023, +9.31pct compared to the same period. In the future, as the scale of the company's overseas business continues to expand, it is expected that the overall profitability will be further enhanced.

The plan is to invest in high-performance bars, which will further improve the production capacity layout of the main business. On August 6, the company announced that it plans to build a digital production line construction project for high-performance bar profiles in the Hetang High-tech Industrial Development Zone in Zhuzhou City using its wholly-owned subsidiary Huarui New Materials as the implementing entity. The total investment of the project is expected to be about 0.36 billion yuan. After completion, the annual production capacity of 1,000 tons of high-performance bars will be added to further improve the production capacity layout of the company's main business.

Profit forecast: Give the company an “gain” rating. We expect the company to achieve operating income of 0.944/1.156/1.382 billion yuan and net profit to mother of 0.194/0.267/0.331 billion yuan in 2024-2026. The corresponding PE is 15.42x/11.24x/9.06x, respectively.

Risk warning: Downstream recovery falls short of expectations, raw material prices fluctuate sharply, market competition intensifies, new production capacity climbing progress falls short of expectations, profit forecasts and valuation models fall short of expectations