Incident: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 0.095 billion yuan, a year-on-year increase of 2.21%, and net profit to mother 0.012 billion yuan, an increase of 18.91% year-on-year. The performance was in line with expectations.

The results for the second quarter were impressive, and the level of profit increased significantly. Looking at Q2 alone, the company achieved revenue of 0.071 billion yuan in 24Q2, an increase of 75.68% year on year, and net profit of 0.024 billion yuan, up 405.84% year on year. Performance increased sharply year over year. Although there were significant fluctuations in delivery and revenue recognition between quarters, downstream demand was also gradually recovering. Judging from the profit level, the gross margin of 24Q2 sales was about 44.69%, a slight decrease of -3.85pct year over year, and an increase of 1.42pct month-on-month, and remained at a high level.

The Q2 net profit margin for the single quarter was 33.3%, a significant increase over the same period last year. As the pace of nuclear power construction accelerates, the nuclear fuel cycle industry chain has also been further improved, and the construction of nuclear fuel production capacity and spent fuel reprocessing facilities is also constantly increasing. As a leading enterprise deeply involved in the field of robotics and intelligent equipment in the nuclear industry, the company closely follows the pulse of the industry. The business has covered the entire nuclear fuel cycle industry chain, and is optimistic about the company's long-term development.

Continued breakthroughs in the application of nuclear technology and military business are expected to gradually expand in the non-nuclear business. 1) Application of nuclear technology: According to relevant statistics, China's nuclear drug market reached 1.34 billion US dollars in 2020, with a compound annual growth rate of 9.9% from 2017 to 2020. The nuclear drug industry chain can be mainly divided into medical isotope production, radiopharmaceutical R&D and production, and clinical use of radiopharmaceuticals. At present, in the field of medical isotope production, the company has formed automated production line solutions and has been applied in important institutions such as the Qinshan Isotope Production Base and the Institute of Modern Physics of the Chinese Academy of Sciences. In terms of radiopharmaceutical preparation, the company is developing products such as automatic dispensers and automatic drug delivery systems, and the first generation products have been applied by related pharmaceutical companies, laying a good start for future business expansion. 2) Military industry: The company takes the military industry as a key business development direction, and has carried out a comprehensive strategic layout. The company saw initial results in developing products related to intelligent security systems. Through testing and comparison, it has obtained relevant orders and successfully entered the next stage of development. In addition, the company is also actively developing the market for intelligent equipment in the pyrotechnics industry, and has already undertaken projects under the China Ordnance Industry Group Co., Ltd. The progress of several landmark projects has laid a solid foundation for the company's subsequent comprehensive development in the military industry.

Investment advice: We expect the company to achieve net profit of 0.082, 0.115, and 0.165 billion yuan in 2024-2026, respectively, corresponding to PE 39.8/28.1/19.6 times, respectively, and maintain the “recommended” rating.

Risk warning: Downstream demand falls short of expected risk, technology development falls short of expected risk, project approval and delivery schedule falls short of expected risk, risk of raw material price fluctuation, risk of nuclear safety accidents,