Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.052 billion yuan, a year-on-year increase of 5.28%, net profit of 0.144 billion yuan, a year-on-year increase of 14.53%, after deducting net profit of 0.127 billion yuan, a year-on-year increase of 9.07%. The performance was in line with expectations.
Results grew steadily in the second quarter, and gross margin levels continued to improve. The company achieved revenue of 0.482 billion yuan in 24Q2, a year-on-year decrease of 4.1%, and net profit to mother of 0.06 billion yuan, an increase of 21.23% over the previous year. In terms of profitability, 24Q2 gross margin was about 33.08%, up 2.58pct year on year, 2.77pct month-on-month increase, net sales margin 12.37%, 2.53 pct year-on-year increase, and 2.3 pct month-on-month decrease.
Shentsu's nuclear energy orders increased 92% year over year, and we expect the nuclear power business to continue to expand. By business, the company's nuclear power industry's revenue was 0.354 billion yuan, up 1% year on year, and the gross profit margin was 38.51%, down slightly from 2023, mainly due to differences in product delivery structures over different periods. The nuclear power industry is affected by the pace of delivery, with large differences in delivery volume between quarters. Delivery volume in the second half of the year is usually higher than in the first half of the year. In addition, 2024H1 Shentong Nuclear Energy received an additional order of 0.504 billion yuan, an increase of 92% over the 2023H1 order of 0.262 billion. Nuclear power orders grew rapidly, and the boom continued.
The energy saving and environmental protection business achieved rapid growth and entered a revenue sharing period. 24H1's energy equipment business achieved revenue of 0.225 billion yuan, a year-on-year decrease of 34%, mainly affected by weak downstream demand. The metallurgical industry achieved revenue of 0.221 billion yuan, a year-on-year increase of 32%, reversing the downward trend in 2023 and improving markedly. In terms of energy saving and environmental protection business, 24H1 achieved revenue of 0.188 billion yuan, an increase of 118% over the previous year. The main business of Ruifan Energy Saving Technology Co., Ltd., a subsidiary of the company, is contract energy management (EMC) for the application of energy-saving technology for blast furnace gas wet drying and TRT waste heat utilization and desulfurization and denitrification systems in the steel industry. The contract energy management business provides an industry integrating early energy saving diagnosis, energy saving transformation design, mid-term financing, project implementation and operation, and post-energy saving measurement and tracking services according to the customer's energy requirements, and recoup investment and profit from the energy efficiency obtained by the customer after carrying out the energy saving transformation. After years of intensive cultivation and project promotion, the Jinxi and Han Steel projects that the company participated in have begun to share energy efficiency, and the gross margin of 24H1's energy saving and environmental protection business is about 36.59%, which is a good profit level.
Investment advice: The company is expected to achieve revenue of 2.35, 2.67, and 2.94 billion yuan respectively in 2024-2026, and net profit to mother of 0.315, 0.389, and 0.45 billion yuan, respectively. The corresponding PE is 17/13.7/11.9 times, respectively, maintaining the “recommended” rating.
Risk warning: risk of macroeconomic fluctuations, risk of downstream demand falling short of expectations, risk of approval falling short of expectations, risk of delivery falling short of expectations, competition increasing risk