The company announced its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 2.916 billion yuan, up 0.79% year on year, and achieved net profit of 0.222 billion yuan, up 16.43% year on year; in a single quarter, in the second quarter of 2024, the company achieved revenue of 1.611 billion yuan, up 0.94% year on year, and achieved net profit of 0.128 billion yuan year on year, up 23.02% year on year. The company is vigorously expanding its product and capacity layout in overseas markets, and overseas orders are growing rapidly. As a leading domestic dry-type transformer company, it will fully benefit from the recovery in domestic demand and the continuous expansion of overseas markets in the future, and maintain the company's purchase rating.

Key points to support ratings

Domestic revenue has been pressured by the downstream energy sector, and overseas revenue has grown rapidly. According to the company's announcement, in the first half of 2024, the company achieved domestic revenue of 2.11 billion yuan, down 10.02% year on year, mainly due to the company's domestic new energy sales revenue falling 19.29% year on year. However, the company's downstream sales revenue in the non-energy sector showed varying degrees of increase. Among them, sales revenue for important infrastructure increased 104.69% year on year, power generation and power supply sales revenue increased 67.41% year on year, and new infrastructure sales revenue increased 83.38% year on year; benefiting from the boom in overseas markets and the company's active overseas markets Expanding, the company achieved overseas revenue of 0.791 billion yuan in the first half of the year, an increase of 48.53% over the previous year, and achieved relatively rapid growth.

Due to the development of overseas markets, the cost rate has increased, and the order structure has been continuously optimized and profitability has steadily increased. The company firmly and continuously promotes digital transformation, and the advantages of digital manufacturing are becoming more prominent. As the company's high-quality customer and order ratio continues to increase, the company's profitability also increased. In the first half of 2024, the company achieved a gross sales margin of 23.36%, an increase of 1.60 pct over the previous year, a net profit margin of 7.55%, and an increase of 0.95 pct over the previous year. In terms of cost ratio, in the first half of 2024, the company's sales/management/ R&D/finance expenses were 4.27%/5.30%/4.94%/0.81%, respectively, compared with +0.98/+0.84/+0.08/+0.83pct, respectively. The increase in cost rates was mainly due to expanding overseas markets and increasing overseas sales capacity and sales operating expenses.

Overseas production capacity is actively deployed, orders are growing rapidly, and on-hand orders are sufficient to support future growth. The company actively expanded the international market, and export orders increased 119.56% in the first half of 2024. In order to further deepen the company's global layout, in terms of production capacity layout, the company has expanded production capacity in Mexico and is preparing to expand production capacity for all products in Mexico and the US. At the same time, it has completed the layout of the Polish factory and European sales and after-sales service headquarters in Europe. It is expected that the company's production capacity in Poland will begin to be released one after another in the fourth quarter of this year. As of the end of June 2024, the company's on-hand orders were 6.562 billion yuan (excluding tax), up 29.88% year on year, including domestic sales orders of 3.713 billion yuan, down 7.98% year on year, and export orders of 2.849 billion yuan, up 180.16% year on year. As the proportion of the company's high-quality orders continues to increase, it will lay a solid foundation for the improvement of the company's business quality and sustainable healthy development.

valuations

Considering the impact of pressure on the domestic downstream new energy industry, we lowered the company's profit forecast. It is estimated that in 2024-2026 the company will achieve operating income of 7.568/9.347/11.153 billion yuan, net profit of 0.648/0.921/1.139 billion yuan, EPS of 1.42/2.01/2.49, corresponding PE is 25.5/18.0/14.5 times. As a leading domestic dry-type transformer company, the company vigorously develops overseas markets and energy storage and digitalization The development of new businesses such as factories gradually opens up room for growth, and maintains the company's purchase rating.

The main risks faced by ratings

Downstream demand falls short of expectations; profitability of the energy storage business falls short of expectations; risk of fluctuations in raw material prices; risk of increased competition in the industry.