China Control Technology 2024H1 achieved revenue of 4.252 billion yuan, an increase of 16.78%; net profit to mother of 0.517 billion yuan, an increase of 1.16%; net profit after deducting non-attributable net profit of 0.472 billion yuan, an increase of 11.41%. Excluding GDR exchange gains and losses, net profit to mother was 519.4708 million yuan, an increase of 49.80% over the same period last year. Net cash flow from operating activities in the first half of the year was $419.9275 million, up 57.30% from the same period.

Large-scale equipment upgrades drive the growth of industrial automation business and accelerate the advancement of global strategies. The State Council's “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-In” requires that the scale of equipment investment be increased by more than 25% by 2027 compared to 2023, and that the penetration rate of digital R&D and design tools and digitalization of key processes in industrial enterprises above scale will exceed 90% and 75%, respectively. 2024H1 achieved a total revenue of 1.725 billion yuan for control systems (control systems and control system+meters), an increase of 17.65%, and instrument revenue of 0.353 billion yuan, an increase of 72.18%.

In terms of overseas business, the company continues to expand in markets such as Southeast Asia, South Asia, and the Middle East, and has successfully promoted the application of the company's core products to more than 50 countries. On H1 in 2024, the company signed an intelligent robot project with Saudi Aramco Central Warehouse AMR, as well as a LNG (LNG) tank tank project with CNPC. 2024H1, the company's overseas business revenue was 0.343 billion yuan, an increase of 188.22%, accounting for about 8.11% of the main revenue. The signing of new overseas contracts was 0.5 billion yuan, an increase of 63.82%. The company has an overseas team of nearly 300 people and 6 overseas subsidiaries. Localized operation capabilities have been improved.

Traditional dominant industries have grown steadily, and new industries and new applications have made further breakthroughs. The revenue of the petrochemical and chemical industries with traditional advantages of central control technology increased by 26.95% and 26.03% respectively in the first half of the year. The company dug deep into structural demand growth opportunities in key emerging industries such as oil and gas, smart coal mines, and liquor. Revenue from the oil and gas and pharmaceutical industries increased by 117.32% and 29.23% in the first half of the year. The company pioneered new business fields such as robotics, wind and solar hydrogen production, smart laboratories, and smart parks. Smart coal mines teamed up with Shanxi Jinneng Duan Wang Coal Industry and Pengfei Group to create breakthrough benchmark applications in the industry. The robotics business successfully received orders from high-end global users such as CNOOC, Huayi Group, and Saudi Aramco, and took a stake in the Zhejiang Humanoid Robot Innovation Center as the largest shareholder.

Launched the world's first UCS to accelerate the integration and application of AI technology in the industrial field. The company's current automated control segment covers products such as distributed control systems (DCS), safety instrumentation systems (SIS), and programmable logic controllers (PLC). In June 2024, the company launched the first general control system (UCS), Nyx, which is characterized by software-defined, cloud-native, fully digitized, and deeply integrated industrial AI technology.

Nyx can save 90% of cabinet space, 80% of cable costs, and 50% of the transformation cycle; software and hardware decoupling to achieve rapid deployment and flexible adjustment; fault isolation, derivative repair. In terms of the application of artificial intelligence, central control technology publishes the process industry's first large AI timing model TPT based on massive operation, quality, equipment, and simulation data from different industries. It can integrate simulation and prediction capabilities, unify the modeling process in multiple scenarios, and can be reused across different devices and operating conditions. At present, the company's industrial applications based on TPT have been applied to chlor-alkali, thermoelectric, petrochemical and other devices. Compared with traditional control systems, the automatic control rate has reached more than 95%, and the nitrogen oxide content has been reduced by 5%. At the same time, InPlant ChatBA, an intelligent question and answer product for central control enterprises, can provide five types of product functions: knowledge quiz, office assistant, AI tool, intelligent question count, and smart software.

Adhere to the “5S Store+S2B Platform” marketing model, explore the subscription system, and promote ecological construction. As of the first half of the year, the company had built 195 5S stores (including overseas) and established overseas 5S stores in Saudi Arabia and Thailand. In 2024, the S2B online platform will continue to promote the joint cooperation of more than 500 large customers with the Federal Reserve on a large scale, seamlessly connecting the customer procurement system. At the same time, subscription membership can effectively help users improve overall comprehensive service capabilities over the long cycle from design to operation, and strengthen adhesion with customers. In June 2024, the company and Shanghai Huayi Engineering Co., Ltd. successfully signed the first subscription one million premium membership. In terms of ecology, in the first half of the year, the company signed new strategic cooperation agreements with many leading domestic and foreign companies such as China Fifth Ring Road, Dongfang Cable, Indonesia National Gas Company, China Tianchen, Zhejiang Operation, and Jiazhi Technology. The “Clustar Galaxy Program” launched in June mainly provides platform empowerment, value co-creation and institutional guarantee for ecological partners. It guarantees rights and interests in R&D, supply, sales, and services, which helps the company establish a global ecosystem.

Profit forecast and investment suggestions: The company is a leader in domestic process industry automation. It benefits from equipment replacement policies, stable growth in advantageous industries, and optimistic growth in new industries and applications, and considers a certain leading premium. From 2024 to 2026, the company's total revenue is expected to be 10.767/13.115/15.704 billion yuan, corresponding growth rate of 24.91%/21.80%/19.75%; net profit to mother is 1.288/1.584/1.924 billion yuan, up 16.91%/22.97%/21.47% year-on-year. The corresponding EPS is 1.63/2.00/2.43 yuan. In terms of comparable companies, Baoxin Software, Guodian Nanrui, Huichuan Technology, and Keyuan Intelligence are leading domestic industrial automation companies, which are similar to the company's main business. The four comparable companies forecast an average PE of 22.52/18.82/15.79 times for 2024-2026. The current price of central control technology is 22.56/18.34/15.10 times the 2024-2026 PE, maintaining a “highly recommended” rating.

Risk warning: macroeconomic fluctuation risk, core talent loss risk, market competition and technology development risk, overseas market operation risk.