Performance is in line with our expectations

The company released its 2024 semi-annual report: 1H24 revenue of 94.69 million yuan (YoY +2.21%), net profit of 12.48 million yuan (YoY +18.91%); in a single quarter, we estimated 2Q24 revenue of 71.43 million yuan (YoY +75.68%) and net profit to mother of 23.65 million yuan (+405.84% YoY). The results are in line with forecasts and our expectations.

Non-nuclear intelligent equipment contributed to the second growth curve. By business, the revenue of 1H24's nuclear industry intelligent equipment systems/special robotics/non-nuclear intelligent equipment systems was -20%/+20%/+1683%, respectively, to 62.7/6.44/24.38 million yuan, respectively. The main reason was that after related business comparison tests and verification, the company achieved substantial results in the second quarter. At the same time, the company developed intelligent equipment in the pyrotechnics industry and obtained project contracts and completed delivery and acceptance.

1H24 net margin increased 1.85ppt year over year. 1H24's gross margin decreased by 7.42ppt to 44.34% year-on-year, mainly due to intense competition in the industry and the early stages of business development. The gross margins of the nuclear industry intelligent equipment system/special robot/non-nuclear special intelligent equipment system business were 36.6%/33.4%/65.0%, respectively. 1H24's sales/management/finance/R&D expenses ratio was 7.9%/29.1%/-3.5%/11.1%, respectively, and the net margin increased by 1.85ppt to 13.18% year-on-year.

Growth in multiple business orders is expected to drive growth. According to the company's July exchange announcement, the second phase of the 1H24 spent fuel reprocessing project was successfully delivered, and the third phase of the demonstration plant project and the large factory research project received significant order growth; orders increased slightly; nuclear fuel component manufacturing and other special processes, orders increased slightly; the nuclear power sector is a key expansion area for the company, and the company has invested in the development of related products and intelligent equipment; we are optimistic about the flexibility of performance growth in the next 2-3 years.

Development trends

Continued development of the industrial chain and production capacity layout. 1) In terms of intelligent equipment, the company provides products such as new high-precision irradiation-resistant robots, special equipment, customized production lines, etc., and also invests in nuclear drug research to actively link the fields of intelligent equipment, nuclide applications and nuclear medicine; 2) The Binfu Cooperation Zone Industrial Park will begin operation at the end of June 2024. The company expects to be put into use in the first half of 2025. We believe it is expected to improve the company's ability to guarantee the rapid growth of the company's subsequent business.

Profit forecasting and valuation

We keep our 2024/2025 profit forecast unchanged. The current stock price corresponds to the 2024/2025 price-earnings ratio of 36.6 times/19.4 times. Considering the recovery in the valuation of the mechanical automation sector, we raised our target price by 10% to 38.18 yuan, corresponding to the price-earnings ratio of 44 times in 2024. There is room for a 20% increase compared to the current stock price, maintaining the industry rating.

risks

Delivery confirms the risk of volatility, deterministic risk of scientific research prototypes, etc.