Brief performance review

On August 22, 2024, the company disclosed its semi-annual report. In the first half of the year, it achieved revenue of 7 billion yuan, +26.1% year over year; realized net profit to mother of 1.15 billion yuan, +32% year over year; and gross profit margin of 34.6%, +3.5pct year over year. Among them, Q2 achieved revenue of 3.97 billion yuan, a year-on-year increase of 20.4%; net profit to mother of 0.79 billion yuan, +31% year-on-year, and the performance exceeded expectations.

Management analysis

(1) Electricity distribution: Domestic and overseas two-wheel drive, high increase in revenue/net profit/on-hand orders.

1H24's intelligent electricity distribution business achieved revenue of 5.38 billion yuan, +26% year over year, and achieved net profit of 0.97 billion yuan, +29% year over year; cumulative orders in hand were 14.89 billion yuan, +26% year over year.

1) Overseas: Deepen local operations, focus on system integration projects, and promote overseas distribution.

During the reporting period, the company's five major overseas production bases in Brazil, Indonesia, Poland, Germany and Mexico increased their production capacity to about 50%; the German base successively received small-batch orders; the Brazilian factory initiated automation upgrades to improve efficiency and reduce costs; the power distribution business broke through the European market; and the electricity business broke through the Netherlands in Europe (covering a total of 16 European countries). In terms of qualifications and honors, the company has passed the highest CMMI V2.0 L5 international certification in the global software field; has the industry's first digital factory; and its subsidiary Samsung Intelligence has won the national intelligent manufacturing demonstration scenario, etc. 1H24's overseas orders accumulated 6.22 billion yuan, an increase of 40.5% over the previous year.

2) Domestic: The power grid continues to lead in winning bids, and the coverage rate of major customers in the off-grid industry has increased.

Domestic power grids remain industry-leading in terms of bid amounts; off-grid customers focus on the field of new energy, increase the coverage rate of the five major and six small groups, dig deeper into the bidding needs of provincial companies, and increase the development of major customers in the local industry. 1H24 accumulated domestic orders of 8.68 billion yuan, an increase of 16.9% over the previous year.

(2) Medical services: Consolidate the first-mover advantage in the field of rehabilitation and improve the chain medical system.

The company continues to build a rehabilitation medical service chain system featuring critical care rehabilitation. A total of 6 new hospitals were added during the reporting period, and the total number of beds has exceeded 10,000. 1H24's medical service business achieved revenue of 1.613 billion yuan, an increase of 26.53% year on year. Among them, rehabilitation medical business achieved revenue of 0.814 billion yuan, an increase of 36.54% year on year; comprehensive and other medical business achieved revenue of 0.798 billion yuan, an increase of 17.71% year on year.

Profit Forecasts, Valuations, and Ratings

Considering the significant increase in the scale of the company's domestic and overseas business in the electricity distribution sector and the continuous consolidation of the medical care chain, we expect the company to achieve operating income of 146.83/185.69/22.539 billion yuan in 24-26, an increase of 28/27/ 21%; achieve net profit of 2.38/2.98/3.62 billion yuan, or 25/ 21%. The current price of the company's stock corresponds to a PE valuation of 18/14/12 times, maintaining a “buy” rating.

Risk warning

Power grid investment falls short of expectations, overseas business expansion falls short of expectations, hospital expansion falls short of expectations, risk of medical malpractice disputes, impairment of goodwill, changes in medical policies, exchange rate fluctuations