Event: On August 16, 2024, the company released its 2024 annual report. In the first half of 2024, the company achieved total operating income of 94.69 million yuan, an increase of 2.21% year on year; realized net profit of 12.48 million yuan, an increase of 18.91% year on year; realized net profit after deduction of 1.349 million yuan, an increase of 97.56% year on year. Looking at the second quarter alone, the company achieved total operating income of 71.43 million yuan, an increase of 75.68% year on year; realized net profit of 23.65 million yuan, an increase of 405.84% year on year; realized net profit of 15.6 million yuan after deduction, an increase of 478.51% year on year.

Q2 The profit side turned a loss into a profit, and the company's performance is expected to gradually recover. Due to few major project planning and acceptance points in 2023, which limited the company's profit release, successive project delivery confirmation led to a steady recovery in the company's revenue and profit in the first half of 2024. The company's net profit to mother changed from negative to positive in the second quarter, and the results are expected to continue to recover in the second half of the year.

Deeply involved in the nuclear industry, orders for various projects are growing steadily. The company actively lays out the entire nuclear industry chain. According to the company's investor research records, the second phase of the spent fuel post-processing demonstration plant project has now been successfully delivered, and the third phase of the demonstration plant project and large factory research projects have now received significant order growth; nuclear fuel component manufacturing and other special orders have also increased slightly; at the same time, the company is actively expanding the nuclear power sector and has invested in the development of related products and intelligent equipment. We believe that the orders and tenders in the above process are expected to provide strong support for the company's performance next year.

The non-nuclear sector is expanding smoothly, and the second growth curve is gradually becoming clear. In the first half of 2024, the company achieved revenue of 24.38 million yuan in the non-nuclear sector, accounting for 25.75% of current revenue; in 2023, the non-nuclear sector accounted for only 2.25% of revenue. The company actively lays out to expand military and other non-nuclear fields, and has already achieved encouraging results in the first half of the year. It is estimated that products in this field are still growing, and the products have high gross profit attributes. The gross margin of non-nuclear equipment in the first half of 2024 was 62.02%, which is significantly higher than the current comprehensive gross profit margin. It is expected that future product sales will further increase the company's overall gross margin level.

Maintain an “Overweight” rating. The company lays out the nuclear industry chain, benefiting from the intelligent trend of the nuclear power and nuclear fuel cycle industry. The nuclear industry intelligent equipment market has been improving for a long time, while revenue from the second non-nuclear growth curve has gradually increased. We believe that the company has now entered a period of performance recovery, but it will still take some time for profits to be released. We predict that the company's net profit for 2024-2026 will be 0.92 (previous value 1.11), 1.78 (previous value 1.49), and 2.16 (previous value 2.1) billion yuan, respectively, corresponding PE of 33.6, 17.4 times, and 14.4 times, respectively. The company is one of the targets with the highest “nuclear content” in terms of revenue share in the secondary market. It has scarcity and performance elasticity, and maintains a “gain” rating.

Risk warning events: risk of policy changes; risk of high customer concentration; risk of performance fluctuations due to discontinuous order acquisition; risk of falling short of expectations in fund-raising projects; seasonal risk of performance; risk of untimely update of information used in research reports; risk of deviation in industry size measurement.