Event: On August 20, 2024, the company released its 2024 semi-annual report. 2024H1 achieved operating income of 0.339 billion yuan, +2.15% YoY, and realized net profit of 0.104 billion yuan, or -4.74% YoY. Operating income rose slightly year on year but net profit fell slightly year on year. The main reason was that the company's convertible bonds charged financial expenses according to the actual interest rate. The actual interest rate was much higher than the interest rate on long-term bank loans during the same period, so financial expenses increased a lot.

Looking at a single quarter, 24Q2 achieved operating income of 0.179 billion yuan, -12.11% YoY, +12.58% month-on-month, and realized net profit of 0.073 billion yuan, -7.68% YoY, and +135.48% month-on-month.

In terms of profitability, 24Q2 gross margin was 68.18%, up 8.47 pct year on year, and net margin was 40.65%, up 1.95 pct year on year. The company's expense ratio during the 24H1 period was 24.19%, up 4.74 pct year-on-year.

The scale of self-owned power plants has been growing steadily, and weather factors have slightly affected power generation revenue.

24H1 achieved PV revenue of 0.298 billion yuan, a year-on-year increase of 5.13%, accounting for 88.77% of the main business revenue. The equivalent number of hours generated by 24H1's own power plant was about 503 hours, 13 hours less than 516 hours in the same period last year. It was mainly affected by the rainy season. The number and length of rainy days in the first half of the year increased compared to the same period last year, and the company's photovoltaic unit power generation also decreased. By the end of the reporting period, the total installed capacity of the company's grid-connected self-owned power plants was about 859 MW, and the cumulative installed capacity of self-owned power plants outside the province had reached 150 MW, accounting for 17.49% of the total installed capacity; there were also about 152 MW of self-owned distributed photovoltaic power plants under construction, to be built, and to be signed contracts.

Lay out the energy storage business and build new growth points.

1) Industrial and commercial storage: The company has implemented a number of “grid-charged optical storage and charging smart microgrid” demonstration projects in the early stages. The company will continue to actively invest in industrial and commercial energy storage projects with a single MWH scale based on distributed customer resources; according to the semi-annual report, the company currently has a project reserve of more than 10 MWh. 2) Household storage: At present, the company has planned three types of products: off-grid energy storage inverters, portable mobile power supplies, and off-grid energy storage inverters. The main power segments of the three types of products have completed technical, functional, and appearance upgrades and product finalization, obtained relevant product certifications in the main target market regions, and have sales qualifications and conditions.

Investment advice: The company's business model has obvious advantages. The power generation business can provide a continuous and stable income and cash flow, effectively support the further expansion of the scale of self-owned power plants, and can also support the expansion of diversified businesses related to industrial and commercial energy storage, household storage products, charging piles, etc., forming a new growth point. We expect the company's 2024-2026 revenue to be 0.78, 0.9, and 1.05 billion yuan, respectively, with corresponding growth rates of 13.4%, 15.2%, and 16.8%; net profit to mother will be 0.24, 0.3, and 0.37 billion yuan, respectively, corresponding growth rates of 7.0%, 27.4%, and 23.3%, respectively, based on the closing price on August 20, and corresponding PE for 2024-2026 will be 16X, 12X, and 10X. Maintain a “Recommended” rating.

Risk warning: accounts receivable repayment risk, project development falls short of expectations, etc.