Event: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 2.916 billion yuan, +0.79% YoY, net profit to mother of 0.222 billion yuan, +16.43% YoY, after deducting 0.212 billion yuan of non-return to mother, +13.28% YoY. Among them, 24Q2 achieved revenue of 1.611 billion yuan, +0.94% year-on-year, +23.50% month-on-month, net profit of 0.128 billion yuan, +23.02% year-on-year, +35.06% month-on-month, after deducting 0.111 billion yuan without return to mother, -2.01% year-on-year and +9.52% month-on-month.

Revenue breakdown: Overseas market+non-new energy industry sales revenue growth rate is faster1. Overseas revenue growth rate is high: Benefiting from the booming development of the global new energy industry and AI artificial intelligence, the company accelerated development of overseas markets. 2024H1's export revenue was 0.791 billion yuan, +48.53% over the same period last year.

2. Domestic non-energy sector revenue increased high: domestic sales revenue was 2.11 billion yuan, -10.02% year on year; domestic sales revenue declined by 19.29% year on year; sales revenue in the non-new energy sector showed varying degrees of increase. Among them, sales revenue from important infrastructure was +104.69%, power generation and power supply sales revenue +67.41% year over year, and new infrastructure sales revenue +83.38% year over year.

Profitability: Gross profit margin has risen sharply. With the gradual delivery of overseas orders, it is expected to drive the company's profit to rise 1. 2024H1's gross sales margin was 23.36%, +1.60pcts year on year, and the company's net sales margin was 7.55%, +0.95pcts year on year.

2. 2024Q2's gross sales margin was 21.71%, -3.68 pcts month-on-month, mainly due to increased depreciation due to the transformation of projects under construction at the end of 2023, as well as rising raw material costs, and overseas revenue from high-profit sectors affected by the transportation cycle; the company's net sales margin was 7.87%, +0.71 pcts month-on-month.

3. Looking forward to the company's profit level in the second half of 2024 and the future. As the company's overseas orders are gradually delivered, the profit level of overseas orders is higher than that of the domestic market, so it benefits from the gradual acceptance of overseas orders, driving the company's profit to gradually increase.

Ongoing orders and follow-up prospects: Overseas orders are increasing, and “new quality productivity” helps the company's long-term development1. Domestic and foreign order situation and outlook: As of the end of 2024 H1, the company's on-hand orders were 6.562 billion yuan (excluding tax), +29.88% year-on-year, of which domestic sales were 3.713 billion yuan, or -7.98%. The company's export orders were 2.849 billion yuan, +180.16% year over year. We are optimistic about the high demand for power equipment in Europe and the US. The supercompany has expanded the company's 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 the Polish factory and European sales and after-sales service headquarters. The production capacity is expected to land in 2024Q4, and the company's overseas orders are expected to continue to increase.

2. Digital Empowerment Goes to AI Empowerment: The company's digital manufacturing advantages are becoming more and more prominent, which not only helps the company to improve human efficiency and profit; in the first half of 2024, the total amount of orders signed for the company's overall digital solutions business reached 0.476 billion yuan (excluding tax). Currently, the company is speeding up AI empowerment, launching a large-scale artificial intelligence model project to help the company further improve management efficiency and production efficiency, and at the same time add new products to the digital business landscape to help the development of digital business.

3. A number of products are being developed, and the company is expected to expand its influence in subsequent markets: the company has successfully developed dry-type transformers built into offshore wind power floating cabins and is about to enter the pilot assembly stage. It has developed and mass-produced 110/120kV grade customized liquid-immersion transformer products for different overseas regions, and is actively expanding the new “offshore + overseas” market. The company is rich in core technologies and effective patents at home and abroad. With the company's existing domestic and foreign brand effects and technology research and development capabilities, the company is expected to continue to expand its market influence.

Profit forecast: We expect the company's net profit to be 0.651/1.027/1.558 billion yuan in 2024-2026, corresponding to the 2024-2026 PE of 25.9/16.4/10.8 times, maintaining the “gain” rating.

Risk warning: Overseas new energy construction falls short of expectations, overseas grid investment falls short of expectations, transformer demand falls short of expectations, offshore wind power construction falls short of expectations.