Incidents:

On August 22, the company announced its 2024 interim results announcement. During the reporting period, the company achieved revenue of 6.997 billion yuan (+26.11%); realized net profit to mother of 1.15 billion yuan (+32.23%), gross profit margin of 34.61% (+3.49pct year on year), and net profit margin of 16.49% (+0.76pct year on year).

Comment:

Costs continued to be reduced, and profitability increased significantly. The 2024Q2 company, which performed well in the second quarter, achieved revenue of 3.973 billion yuan (+20.37%), achieved net profit of 0.786 billion yuan (+30.92%), and achieved net profit of 0.703 billion yuan (+27.73%) without deduction to mother. Profitability has improved markedly.

The smart power distribution sector performed well, and overseas orders increased

During the reporting period, the company's intelligent electricity distribution business achieved operating income of 5.38 billion yuan (+26.28%) and net profit of 0.971 billion yuan (+29.37%). By the end of the reporting period, the company had accumulated 14.894 billion yuan (+25.74%) of on-hand orders, including 6.22 billion yuan (+40.47%) of overseas orders and 8.675 billion yuan (+16.94%) of domestic orders. Overseas orders continued to increase, the company's overseas results were remarkable, and brand awareness continued to increase.

Looking at the domestic market, the company continued to take the lead in winning bids. Out-of-network customers focused on the field of new energy and continued to expand customer needs of central enterprises, and won hundreds of millions of yuan of orders during the reporting period.

Looking at overseas markets, the company focuses on localized operations and has built five major overseas production bases in Brazil, Indonesia, Poland, Germany, and Mexico. Overseas production capacity accounts for about 50%, and its overseas influence continues to expand. In August 2024, the company's power distribution broke through America and won the bid for Mexico's 0.08 billion transformer project. Furthermore, the company continued to explore the business transformation of the smart energy turnkey model. During the reporting period, it won the bid for Brazil's COPEL 0.31 billion yuan smart meter turnkey project, and the business structure continued to be optimized and upgraded.

The medical service sector grew steadily, and the in-house hospital layout continued to expand, and the company's medical service business achieved revenue of 1.613 billion yuan (+26.53%) during the reporting period.

Among them, the rehabilitation business achieved revenue of 0.814 billion yuan (+36.54%); the comprehensive and other medical business achieved revenue of 0.798 billion yuan (+17.71%). The company continued to expand its internal hospital footprint. As of the end of the reporting period, there were 34 hospitals under the company, including 28 rehabilitation hospitals, and 6 new ones were added during the reporting period (including 5 self-built and 1 acquired). The total number of beds has already exceeded 10,000, and the scale effect can be expected. Looking at individual hospitals, the company Ningbo Mingzhou Hospital 24H1 achieved revenue of 0.621 billion yuan and net profit of 79.3 million yuan, continuing to contribute to the revenue of the medical service sector.

Investment advice

The company's rehabilitation medical+intelligent power distribution two-wheel business drives development, and the performance growth is impressive. The company is expected to achieve operating income of 14.475/18.192/22.517 billion yuan, +26.3%/25.7%/23.8% year-on-year; achieve net profit of 2.295/2.752/3.293 billion yuan, +20.6%/19.9%/19.7% year-on-year; maintain the “buy” rating.

Risk warning

Overseas business expansion falls short of expected risks; industry competition increases risks, etc.