Revenue for the first half of 2024 increased 5.28% year over year, and net profit to mother increased 14.53% year over year. The company achieved revenue of 1.052 billion yuan in the first half of 2024, up 5.28% year on year; net profit to mother was 0.144 billion yuan, up 14.53% year on year, gross margin/net margin was 31.59%/13.62% respectively, with a year-on-year change of +1.10/+1.07 pct. The increase in profitability was mainly due to changes in the business structure. The share of energy services with higher gross margin increased, and the share of energy business with lower gross margin declined. Expenses were generally stable during the company period. Looking at a single quarter, in the second quarter of 2024, the company achieved revenue of 0.482 billion yuan, a year-on-year decrease of 4.11%, and net profit to mother of 0.06 billion yuan, an increase of 21.23% year-on-year. The gross margin/net margin was 33.08%/12.37%, respectively, with a year-on-year change of +2.58/+2.53 pcts. The company's new orders increased 20.08% year-on-year in the first half of 2024. The increase in orders was mainly due to the increase in nuclear power orders.

Revenue from energy saving services grew rapidly, while energy and chemical revenue declined year on year. In the metallurgical sector, revenue growth in the first half of 2024 was mainly due to a low base for the same period last year, and the decline in gross margin was mainly due to increased competition in the industry. New orders fell 2.00% year on year; in the field of energy saving services, the increase in the first half of 2024 was mainly due to Jinxi Co., Ltd. and Hangang Nengjia Steel Project being put into operation and efficiency sharing began. New holiday orders fell 22.22% year on year; in the energy sector, the decline in revenue in the first half of 2024 was mainly due to poor macroeconomics and weak downstream demand. New orders fell 30.47% year over year.

Eleven nuclear power units have been approved, and the company's nuclear power business is expected to fully benefit. In the first half of 2024, the company's nuclear energy achieved revenue of 0.354 billion yuan, an increase of 1.08% over the previous year. New orders amounted to 0.504 billion yuan, an increase of 92.37% over the previous year. The sharp increase in new orders was mainly due to the continuous batch construction of domestic nuclear power plants. In August 2024, the country approved 11 nuclear power units. The number reached a new high in recent years. In terms of reactor types, it includes 10 third-generation nuclear power plants and 1 high-temperature air-cooled reactor. As a nuclear grade butterfly valve and ball valve faucet, the company accounts for more than 90% of the third-generation nuclear power market. Fourth-generation high-temperature air-cooled reactors have already been supplied, and it is expected that the future will fully benefit the development of third-generation and fourth-generation nuclear power.

Risk warning: changes in nuclear power development policies; new business development falls short of expectations; fluctuating raw material prices.

Investment advice: The company is a leader in special valves, and the nuclear power business benefits from the boom in the industry, but considering the poor prosperity of the metallurgical and petrochemical industries, we lowered our profit forecast for 2024-2026. We expect net profit to be 0.317/0.381/0.438 billion yuan (previous value was 0.341/0.4/0.465 billion yuan), corresponding to PE 18/15/13 times, maintaining a “superior to the market” rating.