Incident: 2024H1's revenue of 2.264 billion yuan increased by 0.54%; net profit to mother of 0.189 billion yuan decreased by 34.28%.
Q2 revenue of 1.348 billion yuan decreased by 5.16%; net profit to mother of 0.11 billion yuan decreased by 47.52%.
Domestic competition intensified and overseas growth was steady: the company achieved a 5.16% drop in revenue in Q2, mainly due to increased competition in the industry and adjustments in product prices. 2024H1 sub-business: 1) Revenue from automatic fire alarms and linked control systems decreased by 3.24% from 1.034 billion yuan, and domestic competition in the commercial sector intensified. After overseas parties acquired FB Group, the company had locations in Canada, France, Spain, and the United Kingdom. The H1 overseas market achieved overall revenue of about 0.374 billion yuan, an increase of 24.70%. 2) Emergency evacuation revenue of 0.47 billion yuan decreased by 9.70%. The company actively adjusted prices, strengthened product quality and cost control, improved service levels, and optimized the cost structure. 3) Five Elementary Systems revenue of 0.243 billion yuan also decreased by 0.69%. Among them, gas detection achieved revenue of 0.088 billion yuan, an increase of 24.09%. The policy promoted the expansion of the industry and led to an increase in demand for supporting products. 4) Industrial fire protection revenue of 0.129 billion yuan increased by 21.00%, forming solutions in various fields. 5) Fire extinguishing business revenue of 0.238 billion yuan increased by 24.61%, continuing to develop sales of multi-certified gas fire extinguishing products.
Equity incentives increased costs, and H1 net profit margin decreased slightly: 2024H1 gross profit margin decreased by 36.83% by 0.19ct, and Q2 gross profit margin decreased by 33.81% and 2.15pct, mainly due to the company's price adjustment strategy under competition. The cost rate for the first half of the year increased by 25.66% to 4.55pct. Among them, sales/management/R&D expenses were 13.42%/7.43%/5.49%, respectively, +1.79pct/+2.24pct/+0.05pct. The net interest rate for 2024H1 decreased by 4.42 pct to 8.34%, and the net profit margin for Q2 fell by 6.60 pct to 8.18%, mainly due to 1) consolidated profit and loss leading to an increase of 0.037 billion yuan in financial expenses; 2) equity incentives also increased expenses by 0.04 billion yuan; 3) channel adjustments and direct sales staff expansion also increased sales expenses by 0.03 billion yuan. Excluding the impact of equity incentive costs, net profit to mother fell by about 22% in the first half of the year. 2024H1 operating cash flow had a net outflow of 0.195 billion yuan, with a year-on-year increase of 0.017 billion yuan: 80.2% increase of 0.2 pct of revenue ratio and 5.2 pct decrease of 78.4% of current payment ratio.
Investment advice: We predict that the company's net profit for 2024-2026 will be 0.534/0.665/0.822 billion yuan, a year-on-year growth rate of -18.96%/+24.56%/+23.56%, corresponding EPS of 0.72/0.89/1.10 yuan/share, respectively. The latest closing price corresponds to 2024-2026 PE 12.85x/10.32x/8.35x, respectively. Maintain an “Overweight” rating.
Risk warning: Real estate recovery falls short of expectations; raw material prices have risen sharply; industry competition has intensified.