Description of the event

On August 19, the company released its 2024 semi-annual report. Among them, in the first half of 2024, the company achieved revenue of 4.252 billion yuan, a year-on-year increase of 16.78%; in the first half of the year, the company achieved net profit of 0.517 billion yuan, an increase of 1.16% over the previous year, after deducting non-net profit of 0.472 billion yuan, a year-on-year increase of 11.41%. 24Q2 achieved revenue of 2.514 billion yuan, a year-on-year increase of 14.49% and a month-on-month increase of 44.59%; 24Q2 achieved net profit of 0.371 billion yuan, a year-on-year decrease of 11.26% and a year-on-month increase of 155.25%, after deducting non-net profit of 0.354 billion yuan, a year-on-year decrease of 0.80% and a month-on-month increase of 198.28%.

Incident reviews

Advantageous industries such as petrochemicals and chemicals maintained rapid growth in the first half of the year. By product, benefiting from the country's promotion of control system equipment updates, the overall boom in industrial automation and intelligent manufacturing related products was relatively good. In the first half of 2024, the company's control system (control system and control system+instrument) achieved revenue of 1.725 billion yuan, an increase of 17.65% year on year, industrial software (industrial software and control system+software+others) achieved revenue of 1.11 billion yuan, an increase of 3.23% year on year, and instruments achieved revenue of 0.353 billion yuan, an increase of 72.18% year on year. By industry, demand for petrochemicals and chemicals in the company's dominant industries continued to grow. Revenue from the petrochemical and chemical industries increased by 26.95% and 26.03% respectively in the first half of 2024. At the same time, the company dug deep into structural demand growth opportunities in key emerging industries such as oil and gas and liquor. Revenue from the oil and gas and pharmaceutical food industries increased by 117.32% and 29.23% respectively in the first half of 2024. At the same time, as the company continues to build digital operation capabilities, the company's operation and management efficiency continues to improve. In the first half of the year, the company's sales, management, and R&D expenses decreased by 1.20%, 1.12%, and 0.72%, respectively. After excluding GDR exchange gains and losses in the first half of 2024, the company achieved net profit of 0.519 billion yuan, an increase of 49.80% over the previous year.

Global localization operation capabilities continue to improve, and overseas markets have become an important growth point for the company. In the first half of 2024, the company's overseas business revenue reached 0.343 billion yuan, up 188.22% year on year, accounting for 8.11% of the company's main business revenue. Overseas business became the company's main growth point. The company currently focuses on Southeast Asia, the Middle East, Central Asia, Europe, America, Japan and other regions. Currently, it has an overseas team of nearly 300 people and has set up 6 subsidiaries in Singapore, Saudi Arabia, Kazakhstan, etc., and the company's overseas localization capacity continues to improve. In the first half of 2024, the company signed a new overseas contract of 0.5 billion yuan, an increase of 63.82% over the previous year. The company's cooperation with high-end international customers such as Saudi Aramco, German BASF, Indonesian National Petroleum Company Pertamina, Thailand's Indorama, and Malaysian Petroleum Company Petronas was deepened, and successfully won the bid for Pertamina's liquefied natural gas (LNG) tank storage tank project and obtained an AMR from Saudi Aramco Central Warehouse Intelligent robot project.

In June 2024, the company released the first universal control system UCS product Nyx and the process industry's first large-scale timing model TPT. Among them, Nyx uses the “cloud-network-end” minimalist network architecture proposed by the company in the world, which can drastically reduce costs, including 90% reduction in cabinet space, 80% reduction in cable costs, and 50% reduction in construction cycles. At the same time, Nyx integrates AI technology to provide functions such as automatic configuration generation and AI integrated PID to achieve data prediction and adaptive control. Currently, Nyx has launched large-scale applications. TPT integrates simulation and prediction capabilities, and also has the characteristics of cross-device and high reliability. Currently, the company's industrial applications based on TPT have achieved breakthrough applications in chlor-alkali, thermoelectric, and petrochemical devices. Compared with traditional control, TPT has achieved a system automatic control rate of more than 95%, nitrogen oxide content reduced by 5%, and energy consumption in tons of steam coal decreased by more than 3.1%.

Investment advice

As a leader in domestic process industry manufacturing, the company is rapidly developing overseas markets and is expected to lead to continued growth in performance. The company's 2024-2026 EPS is expected to be 1.64\ 2.04\ 2.52, corresponding to the company's closing price of 38.56 yuan on August 23, and the 2024-2026 PE was 23.46\ 18.90\ 15.33, respectively. It was covered for the first time, giving it a “buy-A” rating.

Risk warning

R&D progress fell short of expectations. The company's R&D direction is an “industrial 3.0+4.0” intelligent manufacturing solution for the process industry. It requires parallel software and hardware development, which is highly difficult. If the company's R&D progress falls short of expectations, product iteration may not meet customer and market needs, which will adversely affect the company's market share and operation.

Risk of losing core talent. The continuous development of the company's business requires a stable group of technical and management personnel. If a large number of core talents are lost in the future, it will adversely affect the company's technology research and development and business development.

Market competition increases risk. In the industrial automation industry, large multinational enterprises and local enterprises are highly concentrated, and there is a trend of further concentration. The company faces double competitive pressure from multinational manufacturers and local manufacturers. If multinational manufacturers and local manufacturers use low prices and other methods to increase market competition in the future, it will adversely affect the company's performance.

Overseas market operating risks. At present, overseas business has become an important revenue component of the company, and due to the complex and changing global economic and political situation, doing business in different countries may involve a series of specific risks, such as political risk, financial risk, sovereignty risk, etc., all of which may have an uncertain impact on the company's local operations.