2Q24's net profit is under short-term pressure, or due to the pace of order delivery. According to the company's 2024 semi-annual report, 1H24's revenue was 1.484 billion yuan, up 2.10% year on year; net profit to mother was 0.218 billion yuan, up 5.29% year on year. Among them, the company's revenue for the 2Q24 single quarter was 0.765 billion yuan, down 6.05% year on year; net profit to mother was 0.119 billion yuan, down 5.48% year on year. We judge that it was mainly affected by the company's order delivery pace. Considering the impact of the company's order delivery pace, we lowered the company's 2024-2026 net profit forecast to 4.81/6.01/7.10 (previous value: 5.14/6.36/7.57) billion yuan, respectively. Comparatively, the company's 2024 Wind agreed PE average was 13x, giving the company 13x PE in 24 years, corresponding to a target price of 14.85 yuan (previous value: 18.31 yuan), maintaining the “gain” rating.
The gas meter business is growing steadily; the revenue of utility management systems is under pressure. According to the company's interim report, 1H24's smart civil gas terminal and system business revenue was 0.89 billion yuan, up 0.2% year on year; smart industrial and commercial gas terminal and system business revenue was 0.32 billion yuan, up 13.5% year on year to achieve steady growth; smart utility management system and other business revenue was 0.16 billion yuan, down 12.5% year on year. Our judgment may be due to the company's order delivery pace; intelligence Revenue from the water terminal and systems business was 0.12 billion yuan, up 12.6% year over year.
The comprehensive gross margin of 1H24 has increased. The comprehensive gross margin of 1H24 maintains a high level of investment in R&D, with a year-on-year increase of 41.8%, an increase of 1.4 pct over the previous year. We judge that the main companies continue to strengthen operation management, actively carry out cost reduction and efficiency work, and reduce product costs through R&D and design improvements and material procurement cost reduction measures. By business, the gross margins of 1H24's civil gas meters, industrial and commercial meters, and utility management systems businesses were 35.9%/57.4%/50.9%, respectively, +1.4/-0.2/+8.1 pct. We judge or benefit from the company's promotion of various internal management optimizations, fee control, and efficiency to empower the business. In terms of period expenses, the company's sales/management/R&D expenses in 1H24 were 17.0%/4.3%/7.3%, respectively, up 1.2/0.4/0.4 pct year-on-year, respectively, and maintained a high level of investment in R&D.
The urban lifeline safety project has been fully launched, and the smart gas meter leader will start again in May 2023. The Ministry of Housing and Construction stated that it will fully launch the urban infrastructure lifeline safety project. It was mentioned that supporting the construction of IoT intelligent sensing equipment will be promoted to gradually achieve comprehensive perception, automatic collection, monitoring, analysis, and early warning reporting of urban infrastructure lifeline operation data. We believe that with relevant policies or their successive introduction, the demand and penetration rate of smart gas meters in China is expected to continue to rise. As a leading manufacturer in the smart gas meter field in China, the market share of superimposed companies is expected to increase further in the future, and the company is expected to usher in new development opportunities. On the other hand, the company has been actively developing the smart water business in recent years, and is expected to create new performance growth points in the future.
Risk warning: Demand for gas meter updates falls short of expectations; smart water business development falls short of expectations.