Incidents:

The company released its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 2.92 billion yuan, net profit to mother of 0.222 billion yuan, +16%; net profit after deducting non-return to mother of 0.212 billion yuan, +13% year on year; gross profit margin 23.4%, +1.6 pct year on year; net profit margin 7.6%, year on year +1.0 pct year on year.

24Q2 achieved revenue of 1.61 billion yuan, +1% year on year, net profit of 0.128 billion yuan year on year, +35% month on month; net profit without return to mother 0.111 billion yuan, -2% year on month, +10% month on month; gross profit margin 21.7%, +0.7 pct year on year; net profit margin 7.9%, +1.4 pct year on year. The increase in gross margin is mainly due to the continuous increase in the company's proportion of high-quality customers and orders, and the resulting increase in profitability.

Performance split:

1) Revenue caliber

By market: 24H1's export revenue was 0.79 billion yuan, +48.5% year on year; domestic sales revenue was 2.11 billion yuan, -10% year over year, mainly due to a 19% year-on-year decline in domestic news-related revenue.

Downstream: 24H1 non-renewable energy critical infrastructure revenue +105% YoY, power generation and power supply sales revenue +67% YoY, and new infrastructure sales revenue +83% YoY.

2) Order caliber

As of the end of 24H1, the company's on-hand orders were 6.56 billion yuan (excluding tax), +30% year-on-year; of these, in-hand orders for export sales were 2.85 billion yuan, +180% year-on-year; and in-hand orders for domestic sales were 3.71 billion yuan, -8% year-on-year.

Investment advice:

The company has a significant competitive advantage in overseas markets. The share of 24H1 export orders in hand has increased to 43%, the share of export revenue has increased to 27%, and the continuous increase in the share of high-quality customers and orders has led to a continuous increase in profitability.

In addition, the company has expanded production capacity in Mexico overseas, and is preparing to expand production of all products in Mexico and the US. At the same time, Europe has completed the layout of the Polish plant (production capacity is expected to be ready for 24Q4) and the European sales and after-sales service headquarters, which will lay the foundation for the company to further develop overseas markets.

Considering that the company's domestic revenue growth in the new energy sector was lower than expected, we adjusted the 24-25 revenue forecast to 8.2/10.8 billion yuan, yoy +23%/+32% (previous value was 115.9/171.4, yoy +49%/+48%), net profit due to mother was 0.68/1 billion yuan, yoy +34%/+48% (previous value was 0.8/1.23 billion yuan, yoy +60%/+54%), and added 26-year revenue forecast to 14.2 billion yuan (yoy +32%), net profit forecast to mother is 1.35 billion yuan (yoy +36%). The current market value corresponds to the PE valuation 22/15/11X; considering continued high growth overseas and domestic development of two online markets, maintaining a “buy” rating.

Risk warning: Overseas investment in new energy and power grids falls short of expectations, the risk of fluctuating raw material prices, increased risk of industry competition, and the growth rate of transformer demand falls short of expectations.