The company released its 2024 semi-annual report, with impressive results. The company's 2024H1 revenue was 0.627 billion yuan, a year-on-year growth rate of 56.68%; achieved net profit to mother of 0.084 billion yuan, a year-on-year growth rate of 58.10%; realized net profit deducted from non-mother was 0.083 billion yuan, a year-on-year growth rate of 73.35%. Looking at a single quarter, the company achieved revenue of 0.378 billion yuan in Q2, up 63.76% year on year; realized net profit of 0.045 billion yuan, down 31.98% year on year; realized net profit deducted from non-mother 0.044 billion yuan, down 28.17% year on year. The high increase in the company's revenue was mainly due to the increase in mineral processing system solutions and services (EPC) revenue, and the year-on-year decrease in Q2 net profit was mainly due to the impact of exchange earnings.

The ability to control expenses is excellent, and the gross margin of the company's core business continues to rise. The company's 2024H1 sales expense ratio was 5.05%, -1.18pct year on year; management expense ratio was 10.29%, -4.21pct year on year; financial expense ratio was -0.35%, +5.91 pct year on year; R&D expense ratio was 2.42%, -1.12pct year on year; the increase in the company's financial expenses was mainly due to exchange rate fluctuations, and the overall cost rate was properly controlled. The gross margin of the company's 2024H1 mining rubber wear-resistant spare parts/EPC/beneficiation equipment/mining metal equipment increased by 5.50/20.82/9.82/1.25pct respectively over the same period last year, and the company's profitability is excellent.

In the era of mining going out to sea, the leading manufacturer of rubber wear-resistant spare parts for domestic mining equipment set sail. At the macro level, the current growth rate of the global economy is gradually slowing down. Investment has an important position as one of the troika driving the economy. Combined with turbulence in the global political landscape, it has spawned a large amount of safe-haven demand for precious metals; at the medium and micro levels, mining companies' capital expenditure at home and abroad remains high. Combined with policies such as the Belt and Road Initiative, domestic mining companies are seizing overseas dividends. As a leader in wear-resistant spare parts for new materials for domestic heavy mining beneficiation equipment, the company closely follows the downstream development trend. With its deep accumulation on the new material side, the company successfully overcame technical problems such as easy slurry leakage and easy liner wear. Product specifications gradually moved closer to large-scale and high-end, and were recognized by large domestic and foreign mining companies, and is expected to fully benefit from the wave of mining equipment going out to sea.

Profit forecast and investment advice: As a leading manufacturer of composite wear-resistant spare parts for domestic mineral processing equipment, we expect the company to achieve revenue of 1.261/1.522/1.823 billion yuan in 2024-2026, with year-on-year increases of 34.4%/20.7%/19.8% respectively; the company is expected to achieve net profit of 0.157/0.214/0.281 billion yuan respectively in 2024-2026, with year-on-year increases of 95.5%/36.6%/31.2%, respectively; corresponding to the current stock price PE is 21.4/15.7/11.9X. Considering the company's future long-term trend, we will continue to maintain a “buy” rating.

Risk warning: The penetration rate of rubber wear-resistant spare parts fell short of expectations, overseas customer development fell short of expectations, and EPC project delivery fell short of expectations.