Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 2.48 billion yuan, a year-on-year decrease of 6.43%, and net profit to mother of 0.175 billion yuan, a year-on-year decrease of 19.57%.

Performance is under pressure in the short term due to downstream demand. Looking at Q2 alone, the company achieved revenue of 1.328 billion yuan, a year-on-year decrease of 7.98%, a year-on-year net profit of 0.082 billion yuan, a year-on-year decrease of 23.57%, and net profit of 0.073 billion yuan after deduction, a year-on-year decrease of 18.86%. In terms of profitability, 24Q2 gross profit margin was 24.6%, a slight decrease of 0.74 pct year on year, and a net profit margin of 6.89%, down 2.27 pct year on year. Short-term performance is under pressure. The company's main business is explosion-proof motors, and the downstream of ordinary motors is mainly in the petrochemical, coal chemical, metallurgical and other industries, which are affected by downstream demand.

By business, 24H1's motor and service revenue was about 1.87 billion yuan, down 20.8% year on year, gross profit margin was 19.35%, down 3.49 pct year on year, mainly affected by downstream prosperity. Revenue from nuclear power products was 0.55 billion yuan, a sharp increase of 133% over the previous year.

The net interest rate level has increased significantly due to the continuous expansion of the company's sales volume. 24H1 Hardwear achieved revenue of 0.78 billion yuan and net profit of 0.069 billion yuan, corresponding to a net interest rate of about 8.8% for 24H1. However, in '23, the net profit of Harbin Mobile was about 0.088 billion yuan, revenue was 1.3 billion yuan, and the corresponding net interest rate was about 6.8%. Compared with the 23-year net interest rate level, 24H1 showed a significant increase of 2 pct, and profitability improved significantly.

Furthermore, according to the previous acquisition draft, the future cash flow of Harbin Dongsu is estimated to be 0.091 billion yuan and 0.135 billion yuan respectively in 24-25. As of 24H1, the company has achieved a return of 0.069 billion yuan, and the company's performance continues to grow.

Harbin Dongso has third-generation nuclear main pump design and manufacturing qualifications, and Jiadian Co., Ltd. is also the core supplier of fourth-generation high-temperature air-cooled reactor nuclear main pumps (main helium fans), and its R&D and manufacturing capabilities are at the forefront of equipment targets.

As the nuclear power industry enters a peak of approval of around 10 units per year, and the development of fourth-generation reactor technology, I am optimistic about the company's future medium- to long-term development.

Investment advice: The company is expected to achieve net profit of 0.404, 0.509, and 0.59 billion yuan in 2024-2026, respectively. The corresponding PE is 17.8/14.13/12.18 times, respectively, maintaining the “recommended” rating.

Risk warning: risk of macroeconomic fluctuations, risk of downstream demand falling short of expectations, risk of raw material price fluctuations, risk of nuclear power approval falling short of expectations, risk of nuclear safety accidents