Event: On August 10, 2024, the company released its 2024 semi-annual report. 24H1 achieved revenue of 2.916 billion yuan, up 0.79% year on year; realized net profit of 0.222 billion, up 16.43% year on year; realized net profit without deducted net income of 0.212 billion, up 13.28% year on year. In a single quarter, 24Q2 achieved revenue of 1.611 billion yuan, a year-on-year increase of 0.94%; net profit to mother was 0.128 billion yuan, an increase of 23.02% year-on-year. On the downstream side, the company's downstream sales revenue in the non-new energy sector showed varying degrees of increase. Among them, sales revenue from important infrastructure increased 105% year on year, sales revenue from power generation and power supply increased 67% year on year, and sales revenue from new infrastructure increased 83% year on year. In terms of orders, 24H1's on-hand orders were 6.562 billion yuan, an increase of 30% over the previous year.

Profitability increased, and expenses continued to be invested to develop the market. Profitability: The company's 24H1 achieved gross margin/net margin of 23.36%/7.55% respectively, up 1.60pcts/0.95pcts year-on-year, mainly due to the increase in the ratio of high-quality customers and orders, which led to an increase in profitability. Expense side: The company's expenses rate during the 24H1 period was 15.33%, up 2.74 pcts year on year. Among them, the finance/management/R&D/sales expenses ratio was 0.81%/5.30%/4.94%/4.27%, respectively, +0.83 pct/+0.85 pct/+0.08pct/+0.98pct.

The increase in sales expenses is mainly due to developing overseas markets and increasing overseas sales capacity expenses; financial expenses are mainly due to lower exchange earnings. R&D investment: The company continues to promote product R&D iterations. For example, it has successfully developed dry-type transformers built into offshore wind power floating engines, which are about to enter the pilot assembly stage; it has developed and mass-produced 110/120kV grade customized liquid-immersed transformer products for different overseas regions, etc.

Ongoing overseas orders continue to increase, and overseas production capacity is poised to go. The company's 24H1 export revenue reached 0.79 billion yuan, up 49% year on year, accounting for 27%; export orders were 2.848 billion yuan, up 180% year on year, accounting for 43%. Overall, overseas markets have maintained a trend of rapid growth. Jinpan's international influence continues to increase, and market channels continue to deepen. At the same time, the company has expanded its production capacity in Mexico and is preparing to expand production capacity for all products in Mexico and the US. At the same time, Europe has completed the layout of its Polish factory and European sales and after-sales service headquarters. The company expects to prepare production capacity in Poland in the fourth quarter of this year, laying the foundation for the company to further expand the market.

The switch between old and new domestic kinetic energy is expected to pick up in the second half of the year. The company's 24H1 domestic sales revenue reached 2.11 billion yuan, down 10% year on year, mainly due to the company's domestic new energy sales revenue falling 19% year on year.

24H1 domestic sales orders were 3.713 billion yuan, down 8% year on year. In terms of market expansion strategy, the company will strengthen domestic market expansion efforts, continuously develop high-quality customers, develop downstream customers in emerging fields, and further tap domestic market potential, such as expanding in domestic infrastructure construction, data centers and other industries.

Investment advice: The company is deeply involved in the transformer industry. The brand has global competitiveness and the global layout is accelerating. We expect the company's 24-26 revenue to be 8.168, 10.695, and 14.054 billion yuan, respectively, with corresponding growth rates of 22.5%, 30.9%, and 31.4%; net profit to mother is 0.661, 1.018, and 1.564 billion yuan, respectively, corresponding growth rates are 31.0%, 54.0%, and 53.7%, based on the closing price of August 9, corresponding to 24-26 PE is 28X, 18X, 12X. Maintain a “Recommended” rating.

Risk warning: Risk of fluctuations in upstream raw materials, increased risk of industry competition, risk of exchange rate fluctuations.