Incident: China Control Technology released its 2024 semi-annual report. During the reporting period, the company achieved total operating income of 4.252 billion yuan, an increase of 16.78% over the previous year, and net profit attributable to the parent company of 0.517 billion yuan, an increase of 1.16% over the previous year. Excluding GDR capital exchange gains and losses, net profit to the mother was 0.519 billion yuan, an increase of 49.8% over the previous year.

Industrial automation products are still booming, and dominant industries continue to grow steadily. In the reporting period, by product, the company's control system products (control systems and control system+instruments) achieved revenue of 1.725 billion yuan, an increase of 17.65%; 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. Looking at the split industry, the dominant industries in the petrochemical and chemical sectors continued to grow, with revenue increasing by 26.95% and 26.03% year-on-year respectively in the first half of the year.

Improved management efficiency and increased profitability. 24H1's sales, management and R&D rates decreased by 1.2 pct, 1.1 pct, and 0.7 pct, respectively, compared with the same period last year. The optimization of cost rates and the improvement of operational efficiency have led to an increase in the company's profit level. Looking at the profit margin level after excluding exchange gains and losses (which more truly reflects the profitability of the company's business), the net profit margin increased by 2.7 pct in the first half of the year.

Overseas business continues to expand, and the market development prospects are broad. The company focuses on the world, builds an integrated layout in Eurasia, the Middle East and other regions, and leads domestic technology overseas. 24H1's overseas business revenue reached 0.343 billion yuan, up 188.22% year on year, and signed new overseas contracts of 0.5 billion yuan, up 63.82% year on year.

Launch innovative products to lead innovation in the process industry. During the reporting period, the company released the general control system UCS and the process industry timing large model TPT. Relying on innovative products, compounding the company's rich industry expertise in the process industry and deep understanding of different application scenarios, Central Control is expected to form solutions for multi-scenario industrial application requirements in the future, thereby driving the company's further growth.

Investment advice: We expect the company's 2024-2026 revenue to be 10.197 billion yuan, 11.905 billion yuan and 13.725 billion yuan, respectively, and net profit to mother of 1.305 billion yuan, 1.605 billion yuan, and 1.951 billion yuan respectively. We are optimistic about the growth of China Control under the leadership of overseas expansion and technological innovation, and maintain the company's “buy” rating.

Risk warning: downstream demand falls short of expectations; R&D progress falls short of expectations; overseas market operations fall short of expectations.