Key points of investment

24H1 revenue was +26% YoY, net profit to mother +32% YoY, and performance exceeded market expectations. The company released its 24-year semi-annual report. 24H1 achieved revenue of 6.997 billion yuan, net profit of 1.15 billion yuan, net profit of 1.15 billion yuan, +32% YoY after deducting non-net profit of 1.078 billion yuan, +32% YoY; of these, Q2 achieved revenue of 3.972 billion yuan, +20% YoY, net profit of 0.786 billion yuan, +31% YoY after deducting non-net profit of 0.703 billion yuan, +28% YoY. 24H1 gross margin/net profit margin was 34.61%/16.43% respectively, +3.49/+0.75pct year on year. Among them, Q2 gross margin/net profit margin to mother was 37.21%/19.79%, respectively, +5.63/+1.61 pct year on year, and the performance exceeded market expectations.

New overseas countries continued to break through, distribution network equipment going overseas accelerated simultaneously, and localized operations continued to deepen.

The company's 24H1 overseas orders were 6.2 billion, +40% YoY (24Q1 on-hand orders +58% YoY).

1) The electricity meter business is evenly distributed in the three regions “Europe+Middle East, Latin America, Asia and Africa”. The share of new countries in [Europe] is expanding smoothly. Germany and the Netherlands have broken through small-batch orders, covering 16 European countries.

[Latin America, Asia Pacific] Brazil, the core country, won the 0.31 billion smart meter turnkey. At the same time, the model was transformed from an electric meter to a system integrated turnkey model, promoting customer relationships with Wrangier, Schneider, China Denso, etc., and exploring EPC experience. 2) The power distribution business uses overseas channels to strategically focus on the Middle East, Europe, and America. In Q1, Greece won the bid for 0.47 billion distribution transformers/Mexico won the 0.08 billion distribution transformer in August, breaking through the European & North American markets. 3) The integration of the company's German base progressed steadily, the Brazilian factory automation upgrade improved efficiency and reduced costs, 24H1's share of overseas production capacity increased to about 50%, and localized operations accelerated.

Domestic electricity meters and distribution networks are two-wheel drive, and new order projects are strong. The 24H1 smart power distribution business had revenue of 5.38 billion yuan, +26% year over year, and net profit of 0.97 billion yuan, +29% year over year, of which power distribution business revenue was +49% year over year, mainly due to domestic power supply+large industrial customers achieving rapid growth. 24H1 domestic orders in hand were 8.7 billion, +17% YoY (24Q1 +18% YoY). 1) In the network business, 24H1 won the bid for 0.4 billion in the first batch of electricity meters from the State Grid, +30%; the Southern Grid meter/distribution network won the bid of 0.38 billion/0.25 billion respectively, +108%/+40% compared to the same period last year. 2) Off-grid business, increasing the coverage of the five major and four small groups, winning the bid for Datang 0.84 billion/ CGN 0.18 billion substation equipment projects, while also digging deeper into the development of major customers in provincial companies and local state-owned industries.

The medical business is growing steadily and rapidly. 24H1 medical service business revenue was 1.61 billion yuan, +27% year over year, of which rehabilitation medical/comprehensive and other medical revenue was 0.814/0.798 billion yuan, +37%/+18% year over year.

As of 24H1's 34 hospitals, including 28 rehabilitation hospitals (6 new in Q2), the sector business is expected to continue to grow rapidly as the hospital system matures and profit margins increase.

Profit forecast and investment rating: Considering that the company's power distribution business exceeded market expectations, our net profit for 24-26 was 2.4/3.02/3.77 billion yuan (previous value was 2.37/2.87/3.58 billion yuan), +26%/+25% year-on-year. The corresponding current PE price was 17x, 14x, and 11x, respectively. The corresponding PE price was 17x, 14x, and 11x, respectively. The corresponding target price was 42.8 yuan, maintaining the “buy” rating.

Risk warning: Overseas market expansion falls short of expectations, overseas policy risks, and increased competition.